Germany Says ‘Liability Cascade’ Must Prevail for Banks

Plans in the euro area to allow the direct recapitalization of failing banks must stick to a hierarchy of responsibility that starts with the banks’ shareholders, the German Finance Ministry said.

In its report for April, the ministry said a “liability cascade” must prevail in any attempt to save a bank, allowing the European Stability Mechanism to allocate resources on its main job of averting state insolvencies.