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Report: EU cuts duration of proposed moratorium on distressed bank withdrawals

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Report: EU cuts duration of proposed moratorium on distressed bank withdrawals

European policymakers have redrafted proposals to impose a moratorium on withdrawals from distressed lenders, recommending the duration of any stay on deposits be limited to two days, Bloomberg News reported Jan. 30, citing a draft plan it had seen.

The new proposal, aimed at avoiding "unintended negative consequences to financial markets," comes after criticism from the banking industry and at least one regulator of a proposal for a five-day moratorium. The Bank of England had flagged in July 2017 that such a provision could endanger financial stability and lead to serious problems if it becomes law.

The proposal gives financial supervisors the authority to cap deposit withdrawals only once a bank has been declared "failing or likely to fail," the newswire said.

There could also be a freeze on deposits, according to the new draft, which would allow retail customers and small companies enough daily access for them to "cover the cost of living or the regular administrative expenses for running the business."

Diplomats in Brussels will examine the new draft privately Feb. 1, which will have a few exemptions to a bank's obligations. The moratorium could be changed for each specific case, according to the report.