LONDON (MNI) – European Commission plans to hand regulators
statutory powers to haircut the value of senior debt in cases where
loss-sharing was needed for a bank to remain viable could deter
investors, according to ratings agency Moody’s Weekly Credit Outlook.
“A critical question is whether there would be significant demand
for debt that was either subject to contractual bail-in features or that
faced the possibility of statutory write-down,” Moody’s said.
“If not, banks would struggle to achieve the improvements in their
funding structures that regulation will, in time, require. Banks are, in
any event, likely to want to maximise their debt issuance prior to the
new rules coming into force,” Moody’s said.
“Poorly designed instruments would carry hard-to-measure risks that
could encourage poorly informed investment decisions as well as
undermine investor appetite,” Moody’s added.
On January 6, the European Commission proposed a framework to deal
with bank failures in the European Union. A key aim is to provide EU
authorities with bail-in mechanisms to protect taxpayers from the
consequences of a bank failure.
–London newsroom 0044 20 7862 7491; email: ukeditorial@marketnews.com
[TOPICS: M$X$$$,MGX$$$]