It might be your money, but that doesn’t necessarily mean you can access it at any point. At least according to EU regulators.
From Reuters (with my emphasis):
‘European Union 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 rumours of a bank being in trouble.
‘The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender’
The fact that regulators would feel the need to draft such a bill is a worrying indicator of the state of Europe’s banking industry.
And the drafting of a bill such as this might cause exactly the kind of panic that regulators want to avoid!
So, what’s behind it?
A report out this month shows non-performing loans (NPL) in the EU zone were staggering €1.092 trillion at the end of 2016.
That’s is just over 5.1% of all loans that are in some way distressed. Though this is down from 5.7% in 2015, it is still a very high figure.
For context, the US NPL figure is at 1.3%, Japan is at 1.5% and Canada is at just 0.6%.
Greece and Cyprus lead the pack with ratios of 46% and 45% respectively. And Bulgaria, Italy, Ireland, Portugal, Romania, Hungary and Croatia all have ratios between 10% and 20%.
The ‘freeze’ proposal is an effort to stop any type of bank run on these vulnerable banks.
It’s bad times for a lot of EU citizens and the banks in general. And it highlights the fact that the fall-out from the global financial crisis is still very much with us today.
Analyst, Money Morning
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