EU Officials Say No to Unilateral Steps on Banks

Unilateral action such as Ireland's guarantee on all bank savings should be avoided in future financial market intervention, top European Union policymakers said on Monday.

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Ireland has irked its EU partners by deciding to guarantee all bank accounts, spurring some savers in neighbouring Britain to shift money into what are perceived as safer Irish banks.

"We need to avoid negative consequences of unilateral decisions -- there have been negative consequences already," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told a news conference.

"I think we've got to put a brake on unilateral decisions," Almunia said, speaking after a meeting of finance ministers from the 15 countries that use the single currency.

Ireland's move prompted Germany, Austria, Sweden and Spain to take similar steps in what has been criticised as a scattergun approach for a supposedly single market in financial services.

As part of wider efforts to adopt a common approach on tackling banking crises, finance ministers from the EU's 27 member states will on Tuesday adopt principles to keep the bloc's internal market rules intact, said Jean-Claude Juncker, chairman of talks among euro zone finance ministers. 

"We must be careful to avoid cross-border distortions," Juncker said. 

EU ministers will ensure that "systemically important institutions will not be allowed to fail", Juncker said, referring to banks and insurers whose collapse would be hugely disruptive to the broader financial market. 

"We need to think about operational methodologies for saving them. The principles we endorsed will be submitted to Ecofin colleagues tomorrow," Juncker said.

The principles will look at the timing of intervention and issues such as executive payouts.

The European Commission will propose reforming the bloc's rules on deposit guarantees in a bid to reassure account holders who have faced a series of banking failures across the EU amid the worst financial crisis in 80 years.

Almunia said the reform, which would need backing from EU states and the European Parliament to become law, would look at the amount of the guarantee, currently pegged at a minimum of 20,000 euros ($27,180), and rapidity of payouts.

One figure discussed for a minimum guaranteed amount to be harmonised across the EU was around 100,000 euros per depositor.

A Commission official said last week that EU states could emulate Denmark, which has a guaranteed payout within five working days compared with the current EU average time of three months or more.

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