“The key weapon in regulators’ new toolkit is known as “bail-in”. This grants resolution authorities the power to stabilise a failing bank by imposing losses on its creditors. The power can then be used to convert creditors’ interests into new capital to ensure the restructured entity can continue to provide critical economic functions. It means that banks and their creditors, not the taxpayer, will be responsible for the costs of failure in the future,” BBA’s Adam Cull points out.
*Image: Foter.
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