European regulators set to toughen bank bailout rules

BRUSSELS regulators are set to introduce new rules on bank bailouts that would see creditors take a bigger hit when a bank fails.

Officials will discuss the plans later this week, although the rules are not set to be introduced until the late summer, according to reports.

There are not currently such strict rules on who should pay the costs of a bank bailout, with governments around the world having paid out trillions of euros since the start of the financial crisis, often with little cost to those who have put money into the banks. The new rules would change this, making sure that a minimum proportion of the bailout cost would go to creditors.

Last year’s experience with Spain, in which lenders were made to suffer before EU bailout funds were released, is being seen as a template for the proposals. The rules could make this pre-approval system mandatory, thus ensuring that creditors take some of the hit when a bank is rescued.

The new rules are being seen as a way to make banks and lenders more responsible, and improve competition. The European Commission was unavailable for comment last night.