Weather New York, NY +84°F

Regions

EU switches burden of bank bailouts from taxpayers

Close
(Credit: Reuters) This Reuters photo shows European Union flags outside the European Commission headquarters in Brussels.European Union
September 29
5:51 PM 2013

Investors who had been waiting for finer points of the restructuring plan of Monte dei Paschi could soon find themselves wishing their bank would get stuck at another time and place during the financial crisis in the euro zone.

The European Union had switched the burden of bank bailouts away from taxpayers. EU had passed the burden onto bondholders, big depositors and shareholders. This was after the EU's approval of more than EUR5 trillion worth of bailout funds to its financial system in the last five years.

Meanwhile, certainty and a consistent approach on who would pay the bailout in case a bank gets into trouble were still lacking. This had discouraged investment and lenders into the region. The lack of certainty and consistent approach on who would pay the aid for troubled banks only ensured a steady stream of lawsuits when losses were imposed.

A Citi analyst Aaron Elliott said, "We are trending in the direction of a proper priority of claim, a proper following of the hierarchy of the capital structure. But we are certainly not there yet. It's very difficult for investors to get involved."

© 2019 VCPOST, All rights reserved. Do not reproduce without permission.
Tags
Share

Comments

Join the Conversation

Subscribe to VCpost newsletter

Sign up for our Deals of the Day newsletter.
We will not spam you!

Real Time Analytics