Bank creditor rules to hit early

Market euphoria and soaring demand for European bank debt could be brought back down to earth if the EU pushes ahead with the early introduction of rules allowing Cyprus-style raids on bank creditors and big depositors.

Following demands from Germany, the EU law to raid the bondholders and savers of failing banks could take effect as soon as Jan 2015, three years earlier than planned and in time to hit banks exposed by ECB tests next year.

An early start date has won support from the ECB, uneasy over banks’ reliance on its support. Jens Weidmann, the president of Germany’s Bundesbank, this week became the latest policymaker to join the chorus of support.