Is my money safe at European banks? Reflections on the 'bail-in' provisions in recent EU legal texts

Key points:
- When the Cyprus rescue was announced, the initial idea was to have depositors contribute to the banks' rescue. This did not happen but depositors across Europe became concerned. The question arose whether small deposits at EU banks are safe.
- This article examines the safety of deposits of natural persons and small and medium-sized enterprises (SMEs) under four legal texts: three documents adopted in the context of 'banking union' and a fourth text on state aid to the banking sector. These documents contain provisions on the so-called 'bail-in': contributions by a bank's creditors towards a bank's rescue ahead of public assistance.
- The legal acts concerned are the latest available on the Single Resolution Mechanism, the third element of 'banking union', the Bank Recovery & Resolution Directive, the Eurogroup Agreement on direct bank recapitalization from the European Stability Mechanism, and the Commission's 2013 Banking Communication.
- On the basis of the latest texts available at end-2013, it is concluded that deposits covered by deposit insurance will be free from 'bail-in': natural persons and most (in the future: all) SMEs will see their deposits up to €100,000 legally secured.