EU Court Says Bank Rescues Need Not Hit Investors

The European Union’s top court ruled on Tuesday that junior creditors and investors need not necessarily suffer losses before a bank is rescued, a judgment that may work in Italy’s favor as it seeks to bail out its banks.

The ruling, which follows action by disgruntled investors whose savings were wiped out by a bank rescue in Slovenia, is crucial in understanding how new EU rules to impose such losses are rolled out across the region.

The so-called bail-in regime, adopted after the financial crash, forces losses on private investors before banks can be rescued by the state — in order to spare the taxpayer.

While the judges in Luxembourg made clear that imposing such losses was legally sound, they appeared not to require that this happen automatically.

Reuters

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.