Schaeuble Favors ‘Liability Hierarchy’ in European Bank Bailouts

German Finance Minister Wolfgang Schaeuble said he wants to see a “liability hierarchy” where owners and creditors of banks are first in line to bail them out before governments bolster equity and the European Stability Mechanism provides international aid.

“It is not so that all banks can in future cover their capital requirements at the ESM,” Schaeuble told reporters in Dublin after a two-day meeting of European Union finance ministers and central bank governors. “Before the state gets involved in the liability hierarchy, owners and creditors of banks” will be asked to contribute, and the ESM will help if “the government itself can’t because its access to financial markets is restricted,” he said.