Since the financial crisis in 2008 several European governments have been looking for new adapted regulations to prevent tax payers from footing the bill for bank bailouts.
In consequence, France is considering allowing banks to issue a new type of senior debt under the potential name of “senior junior”, permitting to absorb losses in times of financial turmoil. "The project of the government reform would change the order in which creditors of banks are called upon in case of insolvency," according to the French Finance Ministry, Michel Sapin.
However, other European countries such as Germany or the UK take a different approach. Germany, for instance, has changed its legislation to make traditional senior debt easier to bail in when a bank is in difficulty whereas British banks increase their capital to absorb losses by issuing holding company debt that may be bailed out in a crisis.
Brussels officials may be worried about the fact that EU countries use divergent legislative approaches to tackle the issue.
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