Because the hair cut of bank depositors( with large amounts) may be a permanent solution in the future, should a bank encounter economic insolvency, members of the European Union will propose in the upcoming economic summit of May, the possibility that large depositors be also protected from a haircut.
So in the case that a bank is in a state of default the proposal will suggest that bank depositors should be a last resort in the hair cut of deposits, and that only bondholders should bear the cost (bail in), while depositors with savings of up to 100,000 Euros should be protected no matter what.
Should a compromise be reached officials hope that they will bring back confidence in the depositors after the hair cuts that depositors in Cyprus suffered. The IMF and the European Central Bank (ECB) support that large depositors in banks should be treated with fairness and amid a European law which will be in effect in 2015.
This law will guarantee all depositors money of up to 100,000 Euros by the ECB, and since Ireland will take over the Presidency in the next six months, they are also in favor of relaxing the cuts in depositors' money in the banks with an excess of 100,000 Euros. However, they first must have the green light by Germany.
