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Reports: EU court says bank investor bail-ins legal, but not mandatory

The European Court of Justice has handed a victory to theEuropean Commission over its rules governing state aid for banks, BloombergNews reported July 19.

Ruling in a case brought by junior debt holders hit bylosses during the rescue of Slovenia's banking system in late 2013, the courtsaid July 19 that requirements that investors absorb losses before state aidcan be given are "not contrary to EU law."

The court also said, however, that EU member states are notrequired to impose losses on investors, Reuters wrote the same day. The judgesdid say the EC could open an investigation into whether any provision of stateaid breached its competition laws, Reuters added.

The ruling comes as Italian Prime Minister Matteo Renzi islooking for ways torecapitalize the country's banks while shielding some of their bondholders, Bloomberg noted.Many holders of Italian banks' subordinated debt are retail investors.

Slovenia's central bank in the week of July 11 a rumor that GovernorBostjan Jazbec would step down after the EU Court of Justice ruling.