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UNI Finance and the public interest association Finance Watch, said today that events in Cyprus underline the urgent need for reforms to create a more sustainable banking system.



For Marcio Monzane, the Head of UNI Finance, "a sustainable banking system should serve society as a whole. It is unrealistic to expect banks to have a Rate of Return on Equity around 20% when the economy is not growing. The banking system should be investing into the real economy and develop a more inclusive financial business model. Banks should also adopt a language that costumers can understand to be able to better express their needs without business intermediation, making it simple and better."



UNI Global Union General Secretary Philip Jennings said, “The Troika must take full responsibility for the Cyprus bank deposit scam. The bright spark who came up with this idea should be held accountable. There are already one million young economic refugees in Europe, with one in five unemployed in the south. The Troika and its cohorts have just made the situation worse by creating uncertainty in Cyprus that will spread like wildfire across southern Europe and beyond. Their incompetence has created a European bank run panic, shelving investment, victimising the poor and creating more jobless.”

Jennings added, "Who will invest now? Who will dare to trust the banks? Even if Cyprus pulls back from the brink and cuts smaller investors some slack the damage has been done and European banking confidence dealt a hammer blow.”



UNI Europa also supports its Cypriot member ETYK in limiting the damage for the bank employees who are faced with mass redundancies, massive restructuring and violations of workers' rights. This crisis must not be an excuse to dismantle labour rights.



As the proposal currently stands, the majority of international banks and institutional investors who lent money to Cypriot banks and government will not suffer losses, and large mainly non-Cypriot depositors will suffer only limited losses, despite the fact that they benefited from no guarantee above €100,000. But private individuals who deposited their savings in Cyprus’s banks will suffer losses, despite being promised a State-backed deposit guarantee.



Thierry Philipponnat, Secretary General of Finance Watch, said:



“Making ordinary citizens pay for the mistakes of professional financiers and violating the spirit, if not the letter, of the regulation protecting deposits is not the way for EU leaders to solve a financial crisis.”



"Policy makers must honour deposit guarantees or risk undermining public trust in the banking system."



In this context, Finance Watch urges European legislators to ensure that their proposals on Bank Recovery and Resolution (BRR) are strong in design and application.



Finance Watch published a report on the BRR proposals yesterday.



Download Finance Watch’s report on BRR (pdf, 35 pages)



Duncan Lindo, senior policy analyst at Finance Watch and author of the report, said:



"Prevention is better than cure. Recovery and resolution planning, together with structural and other reforms, should be used to address too-big-to-fail, too-complex-to-fail and too-interconnected-to-fail banks before crisis strikes. As we are seeing in Cyprus, allowing banks that cannot fail or be resolved poses a threat to the entire financial system and therefore to the whole economy of a country."