Europe sets new bailout rules

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European banks that get into trouble will have to provide a detailed restructuring plan before they can get a state bailout under rules agreed yesterday.

In a major policy shift, the European Union will change rules on state aid on 1 August in order to create a level playing field among countries and ensure shareholders and junior bondholders contribute to a rescue.

Currently, a troubled bank in one nation might receive support that protects investors and creditors, while one in a different country gets only marginal assistance.

European commissioner Joaquin Almunia said: “Bank owners and junior creditors will need to contribute before any more taxpayers’ money is spent on bank bailouts.”

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