Sweeping reforms to shift the burden of rescuing failing banks from taxpayers to bondholders are to be unveiled by the European Commission, despite fears it will further rattle nervous bank investors.
When a bank is deemed to be failing, regulators will win extensive powers to write down non-guaranteed deposits and senior unsecured bondholders, according to draft proposals obtained by the Financial Times.
While the broad thrust of EU bank resolution reforms are well known, its publication has been delayed for more than a year over fears the so-called “bail-in” tools would make it even harder and more expensive for banks to raise money.
There remain extreme sensitivities over the details. The FT has seen three recent drafts that show fundamental elements of the scheme are still being rewritten, with just a few weeks before the expected publication date.
The latest version includes one big political concession. Rather than forcing banks to raise an EU minimum of debt that can be “bailed in”, national authorities will have discretion to tailor requirements.
If approved in the final version, the increased flexibility could leave a patchwork of different regimes and requirements across Europe.
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