EU Proposes Freezing Bank Accounts to Bailout Megabanks

– July 30, 2017

After nervous customers panicked and drained their accounts, ultimately causing the collapse of Spanish bank, Banco Popular, equally jittery European Union officials are debating the merits of freezing access — preventing anyone from withdrawing any money — at the first sign of a bank run.

Proponents claim measures to halt a rush of withdrawals would prevent the downfall of floundering financial institutions at their most vulnerable point — in hopes of staving off a catastrophe at least as harrowing as that of 2008 — while detractors admonish the move might have precisely the opposite effect, with investors rushing to yank funds at the slightest indication of trouble.

“The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” ‘a person familiar with German government’s thinking’ told Reuters.

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