Wall Street Journal:
But crucially, the banks won't get taxpayer funds until they have come up with a burden-sharing arrangement with investors. According to the draft document, those investors include not only equity holders, but also owners of hybrid capital and subordinated debt.
The idea behind this exercise, for which Spain still has to create a legal basis, is to limit the amount of taxpayer-funded bailout money that has to be pumped into the banks.
But in the case of Spain, such arrangements may still hit ordinary citizens directly, as hundreds of thousands of them bought preferred shares in local banks. Holders of senior debt aren't mentioned in the document, implying that they may escape losses for now—as they have in other large bank rescues in Europe in recent years.
"Senior bondholders within and outside of Spain may be protected whereas pensioners and the little guy who were sold these securities may have to bear a larger share of the burden," said Sony Kapoor, managing director of economic think tank Re-define.
Spanish Finance Minister Luis de Guindos on Monday declined to confirm that retail investors who own preferred shares will be hit by losses, but also didn't rule it out.
The bailout deal has "no explicit reference" to preferred shares, he told reporters in Brussels, where he discussed the deal with his euro-zone counterparts.
The document, however, appears to be very strict on sharing losses with private investors in banks that receive aid.
"Any capital shortfall stemming from issues arising in the implementation of SLEs [burden-sharing exercises] will not be covered by the EFSF assistance," it says, referring to the euro zone's bailout fund.