ECB's Praet: untested bail-in rules are main concern over bank stability

BRUSSELS (Reuters) - The main concern regarding the financial stability of banks in the euro zone is that new EU rules on rescuing lenders without using taxpayers' money have not yet been tested on them, the European Central Bank's chief economist said on Tuesday.

Speaking at a conference in Brussels, Peter Praet said that financial stability has been enhanced but added that "the main concern is that bail-in for large and complex institutions has not been tested yet".

"On paper we have much better recovery and resolution processes, but they have not been tested yet. I would still put a question mark on this," Praet said.

Bail-ins allow regulators to force losses on banks' shareholders, bondholders and large depositors when a lender has to be wound down, meaning taxpayers' money does not have to be used.

The new bail-in rules have been made operational since the beginning of this year.

(Reporting by Francesco Guarascio; Editing by Hugh Lawson)

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