Plans to wind down banks that are too big to fail have at last been agreed but will not take effect until 2018. Italy's recent revelation about derivatives losses proves that there are still plenty of skeletons hidden in European Union (EU) cupboards. The recently reported conduct of bankers in Ireland at the start of the crisis has challenged the validity of taxpayer money being spent on bailouts. This leaves a question mark over Europe's taxpayers making another bailout.

Why do taxpayers have to bailout banks?
They do not have to; politicians have chosen to bail out financial services firms where their failure might have led to the financial system taking massive losses. In principle the taxpayers could make a profit from the returns that banks paid back to governments. In practice the UK Parliament's Public Accounts Committee report of 5 November 2012 said that £68 billion net spent on the failed rescue of retail bank Northern Rock rescue, and the support of Lloyds Bank and Royal Bank of Scotland which are now largely publicly owned "May never be recovered". The US was still owed about US$250 billion at the end of last year, having forked out US$600 billion net. The EU is still distributing €500 billion via the European Stability Mechanism, of which at least €100 billion is earmarked for banks in Spain.

So who carries the can now?
Creditors in any sense. Bondholders, shareholders and account holders before taxpayers. The new rules state that 8% or more of a bank's liabilities have to be written down or converted into equity before the banks can receive any assistance from the outside world. This 'bail-in' model helps the bank to strengthen its position rather than swinging in the wind until help arrives. That help can be up to 5% of the banks total liabilities and has to have approval from Europe.
Not every liability is equal in a bail-in situation. Deposits below €100,000 would be covered under the European deposit guarantee scheme. The claims of ordinary unsecured, non-preferred creditors and depositors from large corporations would be least secure.

National authorities have the discretion to exclude certain liabilities based on exacerbating the situation.

Doesn't that make some banks look more risky than others?
If you were to buy bonds from, or deposit money with, banks in countries that had said they would protect those investments in a bail-in situation it would appear preferable over choosing a country that did not offer those guarantees.
It would be ironic if the rules led to a concentration of business into the most secure banks and in the most secure countries (in the bail-in sense), because they are likely to become too big to fail. Which was the problem in the first place.