FRANKFURT/LONDON Europe's banks broadly welcomed a long-awaited deal on how to spread the cost of bank rescues, but shares in some banks in the region's weaker countries fell on fears they could find it harder to attract funding.
The guidelines, a crucial part of Europe's drive for consistency in banking regulation, would shield taxpayers from footing the bill for bank failures by drawing up terms for shareholders, bondholders and depositors with more than 100,000 euros (86,705.20 pounds) to shoulder the cost of bailouts.
The EU is eager to avoid a repeat of the 2008-2011 crisis, when its member states spent the equivalent of a third of the EU's economic output on saving its lenders. The new rules come into effect in 2018.
Thursday's agreement was hailed as a success by policymakers who had failed to reach a deal last weekend and was seen mostly positively by banking federations in Britain, Spain, Italy, Germany, France and Austria.
But market reaction was mixed and some expressed concerns about the details of the hard-fought compromise. Several banks contacted by Reuters declined to comment.
Shares in some banks in economically weaker countries, including Spain and Portugal, fell, with Spain's Banco Popular (POP.MC) losing 2.5 percent by 1404 GMT and Portugal's BES BES.LS down 1.4 percent. The European sector as a whole .SX7P was down 0.1 percent.
Victor Verbeck, head of investment-grade credit at Robeco Asset Management, said any move to shift the burden of bailouts away from the taxpayer will make investors wary of investing in banks with weaker finances.
"Banks are better capitalised than ever, which means the risk of default is dropping like a stone for the strongest credits in Europe, but this is not the case for all," he said. "Second- and third-tier banks in the core and periphery may struggle to convince investors."
Some analysts also say the new regime could make it harder for weaker banks to attract large deposits, and to issue bonds, since both of these can now be bailed in. Finance ministers' agreement to give countries some discretion over what to bail in is contentious.
"We consider it positive that an agreement between the ministers could be found," the Federation of French Banking (FBF) said. "The FBF regrets, however, the flexibility that is introduced, which is a source of uncertainty."
Under the deal, countries can choose not to bail in or force losses on certain types of depositors or bondholders on a case-by-case basis, if bailing them in would do more harm than good.
Frederic Oudea, chief executive of Societe Generale (SOGN.PA), expressed similar concerns before the deal was done.
Separately, Oliver Moulin, a director of lobby group the Association for Financial Markets in Europe, stressed in a statement the importance of clearly framing any flexibility "to minimise uncertainty, unpredictability and level playing field issues".
Other industry groups were more fullsome.
"The ghost of Cyprus has been vanquished," said Pablo Villasante, general director of the Spanish Banking Association, referring to the fears sparked when Cyprus set a eurozone precedent by imposing losses on large depositors. "I believe it's an agreement that will provide stability."
Antonio Patuelli, president of Italian banking association ABI, said: "Following the agreement reached last night, the European banking union is certainly closer. This was one of the most complex elements that needed to be agreed. What has been agreed is a balanced solution."
Germany's banking association BdB said reaching an agreement was important for standardising who pays for liabilities when international banks fail. "Negotiations should now be finalised so that a cross-border resolution and wind-down regime can be introduced on a pan-European basis," BdB said in a statement.
(Reporting by Edward Taylor and Kathrin Jones in Frankfurt, Aimee Donnellan and Natalie Harrison for IFR in London, James Mackenzie in Rome, Mike Shields in Vienna, Christian Plumb in Paris, Jesus Aguado Gonzalez in Madrid; Editing by Louise Ireland)