EU nations agreed on a framework for bank restructuring and resolution. The deal, which now must be negotiated with the European Parliament, spells out private-investor losses and conditions for receiving aid.
* Regulators will be required to write down creditors in order of seniority until losses reach 8 percent of the distressed bank’s liabilities, with some ability to shift losses among private investors. Above that threshold, they could grant exemptions and turn to national backstops instead of following the formula.
* Deal offers wiggle room for regulators, after notifying the European Commission, to exempt some creditors and shift the burden to others.
* Nations will be required to set up funds, financed through levies on banks, that are big enough to cover 1.3 percent of insured deposits of each country’s banks. Resolution funds will be treated differently than deposit guarantee funds, in terms of conditions for when governments can deploy the money.
* European Commission approval will be needed to tap the resolution funds, which won’t be allowed to contribute an amount more than 5 percent of a failing bank’s liabilities unless unsecured senior bondholders are wiped out.
* If a nation’s resolution fund is twice the size required by the new rules, nations can take advantage of emergency rules that change the loss threshold to 20 percent of risk-weighted assets. Sweden, which said that the standard threshold for using flexibility was too high, wanted the concession.
* Interbank lending with a maturity of less than one week is exempt from the rules, as sought by the European Central Bank. Secured debt such as covered bonds also is shielded.
* Deal must be agreed with EU Parliament before it becomes final. EU financial services chief Michel Barnier wants year-end finish. The new rules would take effect in 2018.
* Parliament, nations disagree on when countries can nationalize their banks, when to start the new bail-in rules, and when national deposit-guarantee funds should be in line to absorb losses.
To contact the reporters on this story: Rebecca Christie in Brussels at firstname.lastname@example.org; Jim Brunsden in Brussels at email@example.com
To contact the editor responsible for this story: James Hertling at firstname.lastname@example.org