EU deal to block future bank bailouts by taxpayers

The chances of European taxpayers again having to bail out a failing bank dropped dramatically yesterday after European Union finance ministers agreed details of a new bail-in regime.

Creditors and shareholders of all banks inside the 27 EU countries, including the UK, will take the first hit in any future crisis. The rules outline a strict order in which investors and creditors will have to join a bail-in, with a taxpayer bailout now the last resort.

"For the first time, we agreed on a significant bail-in to shield taxpayers," said the Dutch finance minister, Jeroen Dijsselbloem. "That's a major shift from the public means, from the taxpayer if you will, back to the financial sector itself, which will now become for a very, very large extent responsible for dealing with its own problems."

Tim Dolan, partner at law firm SJ Berwin, said: "All creditors of banks, and particularly unsecured bondholders …need to understand that there is now a greater risk that they will suffer some loss should their bank fail in the future."

The new rules will not come into force until 2018, and ministers have yet to agree whether bank bail-ins should be ordered by individual countries or a single central authority.

Individual savers will still be protected up to €100,000 (£85,000) of savings.