Initial optimism over the agreement on a financial rescue for Cyprus turned to concern about the increased exposure of investors and depositors to banking losses in the euro zone.
Following earlier EU assurances that the Cyprus model of taxing depositors to help fund the nation's bailout would not be applied elsewhere, Eurogroup president Jeroen Dijsselbloem today told Reuters and the Financial Times that it could provide a template for dealing with bank trouble elsewhere.
Under the Cyprus 10-billion-euro rescue need to avoid bankruptcy, the nation's No. 2 bank will be closed, with uninsured depositors picking up the tab on its losses.
"Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we'll come and take away your problem," Dijsselbloem said. "We're going to push them back."
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'," Dijsselbloem said. "If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders."