Shareholders and junior bondholders to take biggest hit when banks fail
Shareholders and junior bond holders will be the first and hardest hit with losses when a bank fails in future, under new Europe wide rules for financial sector.
The European Commission outlined its plans for so called “resolution” of failed lenders today.
In future some investors will have to be hit with losses before any Government money goes in, in order to reduce the cost of rescues.
Pay caps will be introduced for any bank that gets a bailout, under the scheme.
A common set of rules for bank rescues is one of the main elements of a so called “banking union” along with a single supervisor and common depositor guarantee rules.