The Government supports the principle that the cost of rescuing financial institutions should be shared by the shareholders and creditors of that institution as opposed to being borne by the taxpayer. The Commission's proposal for a Directive establishing a framework for the recovery and resolution of credit institutions and investment firms envisages, among other mechanisms, the use of a "bail in" tool which would see the Bank being recapitalized with shareholders wiped out or diluted, and creditors' claims reduced or converted to shares. There are a number of issues to consider in this context.
In terms of the timescale of January 2018 the Commission makes the point that the projected timetable is necessary to allow time for the maturity of existing debt, along with a need to avoid unnecessary deleveraging and allow institutions to implement capital requirements.
The Commission also advises that the implementation date of 2018 should minimize the effect of the use of the bail in tool on markets and provide re assurance to investors.
We, along with other member states will further examine this time table in more detail over the coming months as part of the EU Council consideration of the Commission proposals.