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Markets may find it hard to absorb wave of bank debt - EU watchdog
December 14, 2016 / 11:01 AM / a year ago

Markets may find it hard to absorb wave of bank debt - EU watchdog

LONDON, Dec 14 (Reuters) - It may be hard for markets to absorb debt worth up to 276 billion euros ($293.39 billion) banks in the European Union must issue to comply with rules aimed at shielding taxpayers from bailouts, the bloc’s banking watchdog said on Wednesday.

The European Banking Authority (EBA) said regulators will have to give some lenders enough time, given the strain on markets from raising such amounts of debt.

The debt is known as MREL and can be written down to replenish burnt through capital if the lender collapses, thus avoiding governments picking up the tab like they had to during the 2007-09 financial crisis.

“Market capacity is uncertain and, at this stage, its potential evolution cannot be adequately assessed,” the EBA said in a statement.

The watchdog estimated the financing needs of 133 banking groups at 186 billion euros to 276 billion euros to absorb losses in a crisis, lower than previous estimates. (Reporting by Huw Jones, editing by Andrew MacAskill)

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