EU Bank Bond Losses Plan May Be Delayed Into 2012, Official Says

The European Union may delay the release of plans imposing losses on bondholders at failing banks until the start of next year to avoid them being unveiled at a time when they could add to turmoil on the financial markets.

The European Commission is seeking to publish the draft law when it won’t exacerbate market volatility, meaning the plans may not be unveiled before the end of the year, an EU official said. Work on the draft law is almost complete, said the official, who couldn’t be identified because the discussions aren’t public.

The proposal will be published “in the coming weeks,” Michel Barnier, the EU’s financial services commissioner, said today in an interview. “We have to choose the right moment, but we are in the final stages.”

The Group of 20 nations has agreed to put in place measures to close crisis banks without risks to financial stability or the need for public bailouts. As well as writing down some creditors, the plans also include requiring banks to draw up so called living wills showing how they could be shutdown if they fail, and empowering regulators to make legal and structural changes to them.

Banks including Citigroup Inc. and Goldman Sachs Group Inc. have said that including writedowns for senior bondholders as part of the measures may make it more expensive for banks to attract funding.

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net;

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.