January 18, 2011 / 9:38 PM / 7 years ago

FDIC to impose losses on failing firm creditors

WASHINGTON (Reuters) - U.S. banking regulators approved a rule on Tuesday on how creditors will be treated under the government’s new authority to seize and liquidate large, failing financial firms.

The Federal Deposit Insurance Corp board voted to approve the regulation, which will go into effect immediately although the agency is seeking additional comments that could be used to make changes in the future.

The rule states that holders of subordinated debt, long-term bondholders and shareholders will receive no additional payments under the new authority. In some cases, however, short-term creditors could receive payments, a move that banking industry groups have complained could lead to market uncertainty.

Reporting by Dave Clarke, Editing by Tim Dobbyn

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