The European Commission has urged 11 member states to fully implement the Bank Recovery and Resolution Directive (BRRD) for a safer financial sector in the region.
Established in 2014, the BRRD is EC’s crisis management program to tackle 2008-like situation without burdening the tax payers.
Bulgaria, the Czech Republic, France, Italy, Lithuania, Luxembourg, the Netherlands, Malta, Poland, Romania and Sweden have been requested to implement the BRRD that involves the creation of recovery plans to help the institutes overcome financial distress.
EC said in a statement: "The objective is to ensure that banks on the verge of insolvency can be restructured without taxpayers having to pay for failing banks to safeguard financial stability. Instead, they provide for shareholders and creditors of the banks to pay their share of the costs through a bail-in mechanism."
The BRRD also provides authorities with the power to intervene in the functioning of the financial institutes to prevent them from failing.
In case they do fail, authorities are given adequate powers and tools to restructure the banks, allocate losses to shareholders and creditors based on a clearly defined hierarchy.
All the member states were to integrate the BRRD into their national laws by 31 December 2014. However, the 11 countries had failed to do so.
In case these countries fail to comply with the BRRD in the next two months, the EC would refer them to the EU Court of Justice.