| 13.9°C Dublin

Bondholders to take hit -- ECB

THE TANAISTE has welcomed indications that the European Central Bank is willing to see senior bondholders take losses when banks that are not systemically important fail.

Although officially, eurozone finance ministers oppose such a drastic move, the ECB President Mario Draghi signalled a limited change in the central bank's stance.

In 2010, the ECB insisted to the Irish Government that no senior bank bondholders should suffer losses, because of concern about the market reaction.

Dublin has long been pushing to change this line, but has never made any ground.

Mario Draghi's comments came during talks with European finance ministers on a bailout plan for Spanish banks last Monday but they rejected the idea.

Tanaiste Eamon Gilmore said there is a memorandum of understanding in relation to Spanish banks being worked on.

He added that such a change would be helpful to Ireland if it were to turn out that way.

Former ECB chief Jean-Claude Trichet had strongly opposed the principle and Mr Draghi's position marks a shift in the bank's stance, which had been to avoid losses for senior bondholders in any bank for fear of undermining confidence in the euro area.

Since taking over from Mr Trichet last November, Mr Draghi is viewed in some quarters as having taken a more pragmatic approach to tackling the 17-nation currency zone's worsening debt crisis.