EU nations 'to be responsible for each other's banks'

30 May 2012

Countries in the European Union (EU) may be obliged to bailout struggling banks from fellow member states it has emerged.

New draft laws created by officials at the European Commission (EC) - which are scheduled to be formally proposed on 6 June - have been designed to clarify how wind-up orders for failing financiers will work in the future.

The rules have been kept under wraps amid fears among policymakers that they may destabilise the region's banking sector but a draft version of the new proposals has come into the public domain.

These reforms represent a significant step towards stronger fiscal integration in the EU as they will effectively make countries responsible for each other's lenders, should the companies run into trouble.

An EU official has described the move as a display of "aggressive intervention powers" that will clean up the financial arena by ensuring debt-ridden firms remain under control.

By Gary Cooper