Top banks give nod to junior debt writeoffs

Junior debt holders should incur a loss on their holdings when a bank gets into trouble, an international bank lobby group said on Monday. In a report supporting banks creating "living wills" to limit damage to financial industry when firms collapse, the Institute of International Finance (IIF) signalled it was bowing to what regulators say is inevitable.
The Financial Stability Board (FSB) of global regulators is finalising "bail in" plans so that bondholders as well as shareholders bear the cost of rescuing banks in the next crisis and not the taxpayer. The key issue is how far to go, for example, whether hitherto ringfenced senior bondholders should also be in the firing line. The IIF said calling on senior bondholders to take a hit - as was briefly suggested in Ireland to tackle its troubled banks - should be the "last resort alternative to winding down the firm".