Bloomberg News

New Europe Rules May Make Bank Bondholders Take Losses, FT Says

May 26, 2012

The European Commission is drawing up plans to allow regulators dealing with banks facing collapse to write down unsecured bonds and deposits not covered by guarantees, the Financial Times reported today.

According to draft proposals seen by the paper, regulators will be allowed to fire the management of a bank that gets into trouble, restructure it and write down debt not backed by assets.

Healthy banks may also be required to issue a minimum amount of debt that can be written off in an emergency, although national regulators around the European Union will be allowed to decide how much they should raise, the FT said.

The proposals, set to be unveiled in early June, are aimed at shifting the burden of bailing out failing banks to bondholders from taxpayers.

They would also require European Union countries to establish funds to provide aid in case banks get into trouble. These would be mainly funded by banks and would include existing deposit guarantee plans, the FT said.

To contact the reporter on this story: Jason Webb in London at jwebb25@bloomberg.net

To contact the editor responsible for this story: Dick Schumacher at dschumacher@bloomberg.net


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