Headlines

European Union regulators should consider the social impact of winding down banks when they apply new liquidation rules that could affect depositors, retail investors and senior bondholders, a German-Italian joint paper said. The document, seen by Reuters, appears to challenge rules on bank failure in force since last year and that aimed to stop taxpayers having to rescue failed banks by mandating that bondholders, shareholders and uninsured depositors bare the brunt of any losses, Reuters reported.

A decision by Abu Dhabi-listed Dana Gas to declare $700 million of its sukuk invalid has sent shivers through the Islamic finance industry, raising concern about the safety of sharia-compliant debt instruments in general, Reuters reported. Dana said on Tuesday it had received legal advice that its sukuk, or Islamic bonds, which mature in October, were not compliant with the Islamic sharia code and had become "unlawful" in the United Arab Emirates.

Kazakhstan is running out of time to get the banking system back on its feet. Even after undertaking its biggest rescue since the 2009 global credit squeeze with a 2.4 trillion-tenge ($7.6 billion) bailout of Kazkommertsbank, the rest of the nation’s lenders will require at least 500 billion tenge more to mend balance sheets, according to National Bank of Kazakhstan Governor Daniyar Akishev. But the state aid will come with strings attached, Bloomberg News reported.

India’s banks have been ordered to use the country’s courts to resolve bad loans totaling about 2 trillion rupees ($31 billion) issued to 12 large debtors. The Reserve Bank of India told the banks to use insolvency laws to find a solution for the debtors, which account for a quarter of the country’s total bad loans, before moving on to resolve the other problem accounts within six months, according to a statement posted on the central bank’s website late Tuesday, Bloomberg News reported.

Spain is calling for “aggressive” and rapid reforms of the single currency area, including the creation of a powerful pan-European treasury and a mechanism to force through labour market and other reforms in recalcitrant member states, the Financial Times reported. “We have a window of opportunity of no more than six months after the German elections [in September],” Luis de Guindos, the Spanish economy minister, said in an interview.

India's central bank said on Tuesday it has identified 12 of the largest loan defaulters and will order lenders to start bankruptcy proceedings against them to start unclogging the $150 billion in bad debt plaguing Asia's third-largest economy, Reuters reported. The move comes about a month after the Indian government gave the central bank greater power to deal with bad loans, including directing banks to initiate an insolvency resolution process in the case of a default under the bankruptcy code.

Dana Gas PJSC plans to more than halve profit rates on $700 million of its Islamic bonds after they were found to be non-compliant with religious law, adding a new twist to a debt restructuring initiated in May, Bloomberg News reported.

China’s leverage crackdown is forcing local companies to confront their addiction to short-term bond sales that they use to roll over debt, Bloomberg News reported. The shock therapy is worsening the outlook for corporate defaults in the second half of this year after borrowing costs jumped to a two-year high. With yields surging, Chinese non-banking firms sold 131 billion yuan ($19.3 billion) of bonds with a maturity of one year or less in May, the least since January 2014 and less than half of the same month last year, according to data compiled by Bloomberg.

Italy’s finance minister has said a “solution” to rescue two struggling banks in the north-east Veneto region — Banca Popolare di Vicenza and Veneto Banca — is close and talks with EU authorities are “encouraging,” the Financial Times reported. The statement by Pier Carlo Padoan comes as Italy’s largest domestic lender Intesa Sanpaolo on Tuesday morning held a board meeting to discuss joining a consortium of Italian lenders — including UniCredit — to provide €1.2bn for the Veneto banks and pave the way for a state-led rescue of the two lenders, say people involved.

The future of Australia’s Ten Network is in doubt after big shareholders, including Lachlan Murdoch, son of News Corp founder Rupert Murdoch, decided not to back a financial restructuring of the struggling broadcaster, the Financial Times reported. Financial advisers to Illyria Limited, an investment vehicle linked to Lachlan Murdoch that owns 7.7 per cent of Ten, told the company on Tuesday that Illyria would not extend or increase its support for the broadcaster’s credit facility.