Frankfurt, Feb. 24, 2016: Bundesbank President Jens Weidmann has been calling for tighter EU banking industry regulatory standards for two years (source: dpa)

Europe weighs its options to deal with troubled banks

European banks are in bad shape, and shareholders and bondholders are feeling the heat. With governments and regulators still groping for a solution, various options have bubbled to the surface.

<i>Three main responses have been proposed to Europe’s banking crisis: 1) more stringent regulation and a cap on government debt purchases; 2) setting up bad banks to be financed by taxpayers or monetary expansion; 3) bail-ins requiring shareholders and bondholders to assume heavy losses. With the policy debate now focused on the need for a political solution, it appears that the third response is the least likely and that taxpayers will ultimately be asked to pick up m...

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Professor Enrico Colombatto
If approved and effectively enforced, Mr. Weidmann’s proposals would make it more difficult for EU member countries to finance their budget deficits, and thus encourage them to cut expenditure and restore fiscal discipline
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