Banks are now reacting to EU laws regarding bailing in of creditors. The rules basically say if a bank needs to be rescued, creditors share the pain too and reduce the burden of the State and possibly increase market discipline. In the EU principles agreed last year, different countries must implement the rules under local laws, so in some countries like Germany depositors and corporates may have priority over other senior creditors. Other jurisdictions like Spain are contemplating different tranches of risk-absorbing capital. This is a fractured way to establish a European wide capital market with the differences and complexity adding to bank funding costs and reducing transparency.
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