New senior bank debt fears over EC proposals

The European Commission’s January 6 proposals on dealing with future bank failures, if passed into law, will change how investors view senior unsecured bank debt.

The German lower house passed a new bankruptcy law in October 2010

Taxpayers have paid heavily for bank bailouts across the European Union, which at the end of 2010 amounted to 13% of the union’s GDP, according to European Commission figures. Politicians have been at pains to balance the competing agendas of containing a systemic crisis in the short term with ensuring taxpayers are not on the hook for future bank failures.

The EC published its Consultation on Technical Details of a Possible Crisis Management Framework for Financial Institutions on January 6