EU seeks to soften rules for tackling failing banks

LONDON (Reuters) - Trading firms could withdraw deposits held at a failing bank sooner than originally planned under draft European Union rules, a proposal from the bloc's president showed on Wednesday.

The aim of the draft rules is to temporarily stop withdrawals of funds from a lender that is failing or likely to fail in order to prevent bank deposit runs.

Under the EU plan published last June, there would be a moratorium or suspension of pay outs for five working days, but critics said such a long period could spark panic in markets.

Bulgaria, which holds the bloc's rotating presidency, has proposed cutting the planned moratorium to two business days.

This would help avoid "unintended consequences" to financial markets, an EU document due to be discussed at a meeting of EU member state officials later this week showed.

"The Presidency believes that the proposed compromise achieves the desired policy objectives by taking into account the many concerns expressed by the member states, the authorities and other concerned stakeholders," it added.

(Reporting by Huw Jones; editing by Alexander Smith)