By Francesco Guarascio and Francesco Canepa

BRUSSELS\FRANKFURT (Reuters) - Creditors will be hit if a European bank fails and no exceptions to this 'bail-in' rule are being considered, the chief of the European Union's bank rescue body said.

Aimed at ending taxpayer-funded bail-outs, the bail-in regime, which could wipe out a bank's debts and some deposits if a bank fails, caused a popular backlash even before it came into effect on Jan. 1, when some creditors of four Italian banks lost their savings when the lenders had to be rescued late last year.

Elke Koenig, chair of the EU's Single Resolution Board (SRB) which enforces the rules, said she did not see any need for their suspension at present.

Last month, Rome unsuccessfully tried to secure an exception, which can be granted if financial stability is in jeopardy, for troubled lender Monte dei Paschi <BMPS.MI>.

"I don't see us in a situation like this at the moment," Koenig told Reuters. "That question has to be answered when I have a file on my desk and I don't have one now."

European rules state a bail-in of private investors can be avoided in cases of serious economic turmoil or if its application endangered financial stability.

"The regulation allows it under very peculiar conditions," Koenig said. "It's really the exceptional case."

She insisted any well-known shortfall had to be dealt with within the existing law, known as the Bank Recovery and Resolution Directive (BRRD).

"If then you can come to the conclusion that applying the BRRD would have social consequences that you think are not appropriate, then you can deal with that," she added.

The European Commission, which oversees the application of EU rules, has hinted at the possibility of compensation for savers mis-sold bonds that can be bailed-in.

MONTE PASCHI

Koenig hopes that Monte Paschi's privately-funded five billion euro rescue plan succeeds but concedes it won't be easy.

"It's a very challenging program," she said. "I wish them all the luck to get it done without public support."

Italy's finance minister Pier Carlo Padoan said last week a state-funded backstop for Monte dei Paschi's plan was not needed, but Bank of Italy governor Ignazio Visco said the possibility of public support for Italian lenders should not be ruled out.

Koenig dismissed any suggestion that the bail-in regime could be called into question.

"Of course there are some who say it doesn't work," she said. "My only answer would be: what's the alternative? Taxpayers? I thought we rightly ruled that out."

She also warned against extrapolating a benchmark from the price set to sell Monte dei Paschi's bad loans as part of its rescue plan, which is between 27 and 33 percent of their original value, far lower than other banks' valuation of their own stock of non-performing credit.

"I would always be very careful to apply a price for one portfolio to the entire market because banks may have totally different portfolios," she said.

(Additional reporting by Frank Siebelt; Editing by Alexander Smith)