Euro Briefly Dives After Comments From EU Lawmaker About How Cyprus Should Be The Standard Approach

An EU law maker has said the European Parliament will push for uninsured deposits to face "bail-ins" (like they did in the Cyprus deal) as part of a new law outlining how to resolve banks in the EU going forward.

The euro fell sharply when the comments hit the wires.

Reuters correspondent John O'Donnell has the scoop:

"You need to be able to do the bail-in as well with deposits," said Gunnar Hokmark, an influential member of the European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks.

The European Parliament has an equal say alongside EU countries when deciding who must bear the brunt of future bank failures such as those now being seen on Cyprus.

"Deposits below 100,000 euros are protected ... deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in," Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed this line.

These comments echo the controversial interview that Eurogroup President and Dutch Finance Minister Joeren Dijsselbloem gave to Reuters and the FT yesterday, in which he essentially said the Cyprus deal could be viewed as a template for future bank restructurings in the euro area.

Of course, faced with a negative market reaction, Dijsselbloem issued something of a "retraction" later that day.

The euro turned sharply lower against the U.S. dollar on this latest report from Reuters, but has since recovered all of its losses.