EU mulls easing bank-failure rules

The European Union is considering easing bank-failure rules introduced to end the era of expensive taxpayer-funded bailouts.
A discussion paper prepared by the European Commission, the EU’s executive arm, envisions setting EU loss-absorbency requirements for its biggest banks, led by HSBC Holdings Plc and Deutsche Bank AG, in line with those issued in November by the Financial Stability Board for the world’s 30 most systemically important lenders. The paper, dated this month and seen by Bloomberg, “explores possible options” for implementing the FSB rule in the EU and isn’t binding on the Brussels-based commission.
Yet Elke Koenig, head of the euro area’s bank resolution authority, has repeatedly said that the currency bloc would exceed global standards to ensure its biggest banks can be restructured and recapitalized without threatening financial stability. “On nine out of 10 occasions,” requirements in the banking union would be stiffer than the FSB’s rules on total loss-absorbing capacity (TLAC), she said in December.
As the EU prepares to implement global banking standards including TLAC, the leverage ratio and the net stable funding ratio, it’s struggling to boost lending and kick-start the economy.
As a result, Jonathan Hill, the EU’s financial-services commissioner, has said he’ll take into account the impact these rules could have on European business. MDT/Bloomberg