EU Lawmakers to Seek 2016 Start for Failing-Bank Writedown LawJim Brunsden
European Union lawmakers want regulatory powers that will force unsecured creditors of failing banks to incur losses to take effect in mid-2016, a legislator in charge of work on the rules said.
The European Parliament’s largest political groups agreed that the so-called bail-in powers, part of a draft law for winding down crisis-hit lenders, should take effect on July 1, 2016, Gunnar Hoekmark said in an interview today. The parliament’s economic and monetary affairs committee is set to vote on the policy on May 20, he said.
The assembly will seek to ensure that the law sets out a clear process for imposing losses on creditors, Hoekmark said.
“My firm view is that it’s very important to have legal certainty on the bail-in hierarchy,” he said. “If you are going to have room for discretionary action, it needs to be clearly defined.”
National governments and the parliament are facing a June deadline set by EU leaders for a deal on the law, which is intended to take taxpayers off the front line for incurring the costs of the banking crisis. Finance ministers are scheduled to discuss the plans next week.
In the European Commission’s original draft of the legislation, published last year, a bank’s unsecured senior creditors could have their claims written down by regulators, or converted into equity, as part of efforts to stabilize or safely wind down a lender. Losses would be imposed on them after the bank’s capital and subordinated debt holders have been wiped out.
While some nations, including France and Spain, back the original proposal for the bail-in powers to take effect from Jan. 1, 2018, Germany and the European Central Bank have called for an earlier 2015 deadline.
Parliament’s May vote will set for stage for negotiations with governments on the final version of the law, Hoekmark said.