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EU makes major changes to rules on state aid to banks

(Reuters) - Europe overhauled the rules covering state aid to struggling banks on Wednesday, in a major policy shift that will put the burden on shareholders and junior debtholders when it comes to restructuring an unstable institution.

From August 1, any bank in the European Union that needs help from the state will first have to present a detailed restructuring plan that ensures its viability before any aid can be disbursed. Currently, aid comes before a restructuring plan.

And the burden on financing the overhaul of an institution will fall first on its shareholders and junior bondholders before any taxpayer money can be used.

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