It’s Your Money But You Can’t Have It: EU Proposes Account Freezes To Halt Bank Runs

It’s Your Money But You Can’t Have It: EU Proposes Account Freezes To Halt Bank Runs

EU states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed.

The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble.

The proposal, which has been in discussion since January, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender.

Spooking Customers

Charlie Bannister of the Association for Financial Markets in Europe (AFME), says “We strongly believe that this would incentivize depositors to run from a bank at an early stage.”

Why Might Customers Want to Run?

Here are a trillion reasons: Over €1 Trillion Nonperforming EU Loans: EU vs US Percentages.

 

Managing Partner of the Asset Preservation Partnership LLP

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