EU to decide who pays when banks fail

The European Union will seek on Friday to forge rules to force losses on large savers when banks fail, a sensitive reform that could shape how the euro zone deals with its sickly banks.

Finance ministers in Luxembourg will try to resolve one of the most difficult questions posed by Europe’s banking crisis – how to shut failed banks without sowing panic or burdening taxpayers.

Bank of America issues `bond crash’ alert on Fed tightening fears

The 1994 bond shock – and seared in the memories of bond-holders – ricocheted through global markets. It bankrupted Orange Country, California, which was caught flat-footed with large bond positions. It set off the Tequila Crisis in Mexico as the cost of rolling over `tesobonos’ linked to the US dollar suddenly jumped.

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Bank of America said the “Great Rotation” under way from bonds into equities closely tracks the pattern of 1994, with bank stocks leading the way.