Juan Manuel Viver, Policy Officer at BETTER FINANCE was interviewed yesterday by Euradionantes to express BETTER FINANCE’s views on the SRM (Single Resolution Mechanism) implemented as of 1st January 2016 in the Euro area.
Mariarosa Borroni, Professor of Financial Intermediaries at the Faculty of Economics and Law of the Università Cattolica in Piacenza explains the role of the SRM preventing the bankruptcy of banking institutions and how it will prevent the taxpayers from footing the bill for bailouts as has been the case until the SRM came into force as of 1 January 2016.
Indeed, a bank in trouble will now have to rely primarily on its own resources and thus turn first to its shareholders and its creditors who hold bonds, or even unsecured deposits of more than 100 thousand euros. Deposits below 100 thousand euros will therefore be fully protected according to the Deposit Guarantee schemes set up in every one of the EU’s Member States.
But according to Juan Manual Viver, this low threshold is a real problem especially for businesses. Indeed he said “we believe this is completely unfair especially for smaller companies which have their liquidity in bank accounts.” He added that the problem occurred in Cyprus where “big businesses and the Cyprian economy are greatly affected by the breakthrough of 100 thousand euro deposits and lots of companies were unable, for instance, to pay the salaries of their employees."
Listen the full podcast here.