EU: Bond Holders not Taxpayers Should Pay for Bank Failures

EU Observer:  The public would be spared from further pain in bailing out banks in the future, with bondholders instead footing more of the bill under plans unveiled on Thursday (6 January) by the European Commission to give EU national regulators more powers to intervene ahead of any crisis.The EU executive outlined a series of ideas up for discussion that suggest bondholders should be forced to accept a ‘haircut’ on their investments in a troubled bank or convert their bonds into equity.

Reacting to high-profile banking failures during the economic crisis from Belgium’s Fortis, to the crash of US investment house Lehman Brothers, to Icelandic banks and Ireland’s debt-engorged Anglo Irish Bank, EU member states have chosen to bail out their banking sector, with private debt being shifted wholesale over to the public sector.

Governments support for banks has amounted to 13 percent of GDP, according to commission figures.  Read more at EU Observer.….