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[LUXEMBOURG] European Union member states are not obliged to make shareholders and junior creditors pay before intervening to rescue a bank, the EU top court said on Tuesday.
EU rules imposing losses on bank creditors before a bank bailout were considered legal by the Luxembourg-based European Court of Justice in its ruling over a Slovenian banking rescue.
However, the rules are not binding on member states, the court said in its ruling that slightly limits the European Commission's antitrust powers amid talks for an Italian banking bailout. The court said that burden-sharing by shareholders and subordinated debt holders was not a precondition for granting state aid to a troubled lender.
The judges added that the European Commission, which oversees the application of EU rules in member states, might still open a formal investigation to establish whether a state breached EU competition rules in granting state aid to a bank without imposing losses on its junior creditors.