ECB head Mario Draghi seeks protection for bondholders

By Marc Castro

Oct 19, 2013 09:55 AM EDT

The European Central Bank head Mario Draghi informed the European Commission last month requesting that bondholders be spared any losses in the event a bank rescue occurs until such time an EU banking union is put in place. The information was published in the newspaper la Repubblica last Saturday.

The said Italian daily cited sources with direct knowledge of the letter sent out by ECB President Draghi.

For its part, the ECB and the Commission were not immediately available for comments.

The paper reported, "The ECB President is not against imposing losses on bank creditors once the European banking union operate at full speed. Draghi, however, fears that imposing losses on bondholders now, potentially for dozens of European lenders at once, can destabilize markets."

The EU agreed on a bail-in plan earlier this year. And some ECB policymakers want this brought in more quickly. The bank also has set the conduct of a health check-up of European banks before supervising the sector by late next year.

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