The EU is considering banning the withdrawal of deposits from troubled banks

The European Union is considering measures to temporarily suspend the withdrawal of deposits from troubled banks, Reuters reported, referring to a draft document. The proposal aims to help rescue banks that are doomed or those that are likely to go bankrupt. Critics of the proposal, however, point out that it may undermine the credibility or even encourage the withdrawal of deposits if rumors spread to an institution that it is in poor condition. The proposal, which has been under consideration since the beginning of the year, has come to light less than two months after the Spanish Banco Popular has been the subject of massive withdrawal of deposits, which has contributed to its collapse. The project also comes amid the debates in individual European countries about how to deal with troubled banks around a decade after the start of the financial crisis that the European Central Bank has had to print billions of euros to cope with a prolonged economic downturn. The power to temporarily block the withdrawal of deposits is a "viable option". This is Estonia's position on the case, which is currently the EU's rotating president, which shows that individual countries have different positions on the case. Countries like Germany, where there is a similar option at national level, support such a pan-European measure.  "We want to prevent bankrupt banks from going bankrupt," an anonymous German government official told Reuters.

"We strongly believe that this will prevent depositors from withdrawing money early," said Charlie Banister of the Association for Financial Markets in Europe (AFME) lobbying group. The Estonian proposal was discussed on July 13, but no decision was taken, Brussels told the agency. It is expected that the discussions will continue in September. The text can not enter into force without the consent of the European Parliament. If it is accepted, the document will run counter to the November European Commission proposal to strengthen the powers of national supervisors in cases of mass withdrawals. However, it provides for exclusion from the general rule of guaranteed deposits, ie up to 100,000 euros. The Estonian proposal provides for the withdrawal to be blocked within five days and extended to a maximum of 20 working days in exceptional circumstances.

The current rules within the EU allow a two-day denial of payment in banks in a bad state, but they exclude deposits. Many countries are in favor of stopping payments from supervised banks, but at that time the Bank's other activities continue to run. Most countries are opposed to so severe restrictions when it comes to knowing that a bank is experiencing difficulties, Reuters notes.