EU Agrees Banking Union - Bail-Ins Cometh

[muriel_volestrangler]

7. I don't know how the US would handle a big failure

Again, in the Icelandic case, they had a deposit guarantee scheme for the equivalent of the first €20,000 or so, which they said would cover the British and Dutch people who had savings accounts with Icelandic banks. When the big 3 Icelandic banks failed, what the Icelandic government did was cover the deposits of Icelanders, and told foreign depositors the scheme was bust, and they'd have to wait to get their €20,000 (or less, if they had less in there, of course) until the banks' assets had been sorted out. The British and Dutch governments didn't like that, so they covered the deposits themselves, and demanded the Icelandic government pay them back for it, with interest. After about 4 years, a European court decided in Iceland's favour - that there was no obligation to pay for the deposits by the government, and so the gradual sale of bank assets was all that should be used. By the end of 2013, the failed banks had repaid about half of the value of the guaranteed deposits, and reckon they'll be able to complete that by 2017. But there won't be enough to cover any interest.

So, yes, it can take many years to get money deposited in accounts back. The general feeling on DU has been that Iceland handled this perfectly - that anyone putting money in an overseas savings account didn't deserve to get anything out of the guarantee scheme they'd been told existed.