Germany seeking early start for EU rules hitting creditors of failed banks

Wed Dec 11, 2013 11:51am EST
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By John O'Donnell

BRUSSELS (Reuters) - Bondholders and large depositors in a failing bank could face losses as early as 2016 if Germany succeeds in accelerating tough new European rules to spare taxpayers from further bailouts.

A day after European Union finance ministers met to try to build a single banking framework for the euro zone, EU negotiators and members of the European Parliament were attempting on Wednesday to set out rules that will also provide the foundations for the so-called banking union.

The rules, which will apply across all 28 countries in the European Union, will make hitting bondholders and large savers a permanent feature of the bloc's response to banking crises.

It follows in the vein of losses imposed earlier this year on big depositors in Cyprus when the country's bailout broke a taboo that savers should be spared when a bank is in trouble.

While there is political agreement that savers with more than 100,000 euros and senior bondholders should suffer in the same way as shareholders did during the financial crisis, one central question remains open - when to start the regime.

Germany is seeking backing of other European countries to fast-track the law, originally penciled in for 2018.

A compromise is likely and officials see a start-date of 2016, two years earlier than planned and possibly in time to hit banks exposed by European Central Bank tests next year.

An early start date has won backing from the ECB, uneasy over banks' reliance on its own financial support.   Continued...

Germany's Finance Minister Wolfgang Schaeuble talks to his Finnish counterpart Jutta Urpilainen (R) during a European Union finance ministers meeting in Brussels December 10, 2013. REUTERS/Francois Lenoir