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EU sets plan for an alternative to bank bailout

The European Commission outlined radical measures yesterday to deal with banks that run into trouble with the aim of making shareholders and creditors, not taxpayers, foot the bill.

The European Commission outlined radical measures yesterday to deal with banks that run into trouble with the aim of making shareholders and creditors, not taxpayers, foot the bill.

It proposed that supervisors be allowed to suspend dividends, replace managers or force asset sales to spare governments from having to decide between letting a bank fail — at the risk of disrupting the entire financial system — or let taxpayers bail it out.

One key part of yesterday’s plan is the creation of national resolution funds. These would provide the money necessary to allow an orderly winding down of banks.

The commission wants EU governments to introduce bank levies to raise the revenues for their resolution funds.

 
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