Posts tagged 'Bail-Ins'

Introducing the ‘temporary bail-in’

Here’s the Lerrick Plan. It looks perfect for Italy’s Banca Monte dei Paschi di Siena. Read more

Saving Italy’s banks

How long has the Italian banking system been in trouble? Seriously? Why has no-one supposedly in charge come up with a proper plan?

Instead, Italian bank stocks ping around, up and down every day, like penny dreadfuls reacting to the latest speculation of a political fix or some sort of blind eye treatment from Brussels. Witness Unicredit — up 14 per cent or so at pixel, having previously fallen by a third over the preceding three weeks as the latest stage of this eight-year-old crisis has intensified:

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How does that bail-in instrument work again?

Following the results of the Asset Quality Review and Stress Tests before the end of the year, the bail in instrument will apply for senior debt bondholders whereas bail in of depositors is excluded.

Eurogroup statement on Greece, August 14th

Which ‘instrument’ might that be for wiping the senior bonds of under-capitalised Greek banks? Read more

Warning bondholders, Co-op edition

How’s this for a bank bondholder disclosure? Bear in mind — it’s over 20 years old.

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Reaal resurrection?

You’re Jeroen Dijsselbloem.

You expropriate subordinated bondholders of a Dutch bank, SNS Reaal — insisting that the bonds “entirely lose their value, which would also have happened if SNS had gone bankrupt” rather than receive a €3.7bn bailout. It’s a huge precedent for bail-ins. It’s a new order. No reverse-ferreting.

Months later… Read more

Dear Mr Bailey…

The Commission encourages bondholders, where they are sufficiently concerned, to raise such issues publicly where practical. The PRA should examine the scope for extending bondholder influence of this type…

‘Changing Banking for Good’, Parliamentary Commission on Banking Standards

It’s actually well worth reading the full letter from Mark Taber to Andrew Bailey of the Prudential Regulation Authority, the latest protest against the £500m bail-in of subordinated bondholders that’s emerged from the Co-op Bank mess.

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Introducing “ISDA risk” – it’s like basis risk, but more annoying

How many different types of risk can you name?

Operational risk, market risk, liquidity risk, legal risk, credit risk, etc. Now, let’s add “Isda risk” (pronounced Izzz-dah risk, it has the added benefit of making one’s risk manager sound like a rapper, which hopefully we all can agree is hilarious):

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What price, uninsured depositor risk?

There’s been some thought-provoking revisionism floating around about Cyprus lately.

The gist seems to be this: Why not push bank bail-in policy in the eurozone much harder, right into uninsured depositors if need be, if Cyprus has not (yet?) budged most gauges of bank funding from their current calm. And more importantly, when there is a vicious circle to resolve. Read more

Deposit guarantees and burden-sharing, quote du jour

Not the full-on collision of the two which initially popped up in Cyprus.

Still, we missed this slapdown by the ECB… directed at Spanish plans for the deposit guarantee fund there to buy out retail investors from illiquid preferred shares and subordinated debt in unlisted banks, when those banks are being restructured. Read more

The Cyprus depositor pain-distribution ratio

Out of the aggregate €5.8bn to be raised from deposits, how much would come from smaller depositors, and how much from the €100,000-plus accounts? Clearly a bit of thought went into this when the bail-out was being discussed. Burden allocation, and all that.  Read more

The stupid idea, and the system

Famous last words and all, but it is hard to see the fear flowing from Cyprus to the average depositor in a Spanish or Italian bank. Not in the short term. As for Lehman II, well, come off it.

After all, that’s probably partly why this inequitable tax on small depositors across Cypriot banks could be put on the Eurogroup negotiating table on Friday. The systemic danger is absent. Read more

Bank bail-ins, the long and short term of it

Compare (Bloomberg News, 2011):

EU Writedown Plan Puts Banks’ Long-Term Debt in Firing Line Read more

A tale of bond investor woe

When James Mac is away, the bloggers will play, but this is a rather serious tale. It relates to the nationalisation of SNS Bank, inclusive of its holding company SNS Reaal.

The above video tells the story of one investor in SNS Bank subordinated bonds. Read more

The non-precedent setting, own-law making, secretive CDS committee is having a seriously bad month

Oh boo, the committee that decides on whether credit default swap contracts should payout appears to be having trouble reaching a conclusion about whether the nationalisation of SNS Bank counts as a “credit event”. While the quantity of swaps that hang in the balance is teeny tiny, the issue itself is a big deal because it reveals some of the problems that might crop up in future bank rescues and bail-ins of debt while demonstrating yet again that CDS don’t appear to do what a reasonable person would think they do. Read more

The domestic-law genie

If there is anything that qualifies as protesting too much, surely this is it…

The finance minister of eurozone country X declares (as Vassos Shiarly of Cyprus did on Monday) that its bonds/its banks’ bonds/their depositors simply cannot be written down. Why? Eurozone country X’s constitution and laws just don’t allow it!

Well, on the contrary. Read more

Cyprus doesn’t want a radical rescue, thankyouverymuch

Are you a Russian company with deposits in Cypriot banks?

Do you feel safe?

Do you read newspapers? Read more

Dutch-bottomed bank bondholders

Well, we think “Dutch-bottomed” is probably a better metaphor for what’s happened to SNS Reaal’s subordinated bondholders than Bond Vigilantes’ “Going Dutch”. That just means splitting the bill. Dutch-bottomed is empty, or perhaps fallen through the trap door.

The Netherlands government did an unusual thing when it nationalised SNS, a small and struggling mortgage bank on Friday. It expropriated subordinated bonds of the lender. Here’s the decree. It theoretically suggests the holders still have a claim on the value of the bonds, at some point: Read more

FROB and (bail-in) gristle

Just a small thing from Spain’s latest banking legislation, but a telling thing…

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More on those endangered exit consents

Loads has already been written about last week’s judgement by The Hon Mr Justice Briggs against Anglo Irish, taking a hammer to ‘exit consents’, a key bit of legal engineering in debt restructurings for banks and, sometimes, sovereigns. (There’s a great take by Credit Slips here for instance.)

It was that kind of case. Read more

Bail-ins, an exit consent challenge

On this quiet, Olympics Friday — some bank bail-in reading, courtesy of a judgement by the High Court of England and Wales.

It’s come down surprisingly hard on a small, but very important, weapon in the armoury of bailing-in bank bondholders: exit consents. Read more

The pain in Spain

If German citizens are wary about the Spanish bank bail-out, we can only imagine how some Spanish are going to feel about it.

As Joseph wrote yesterday (via El Pais) the draft memorandum of understanding for the bail-out includes provision to force any bank seeking aid to compulsorily write-off their preferred shares and subordinated bonds. Read more

No bail-in, Spain?

Why shouldn’t equity and (at least in the short term) Spanish bonds rally?

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Feedback loops to give you (credit) nightmares

It’s a changed, changed world.

The introduction of bail-ins and burdensharing means capital markets will never be the same. Read more

Another Danish bank falls into a fjord of failure

Finansiel Stabilitet har indgået overdragelsesaftale med Fjordbank Mors A/S

Som det fremgår af Selskabsmeddelelse nr. 12 af d.d. fra Fjordbank Mors A/S, har banken indgået aftale om, at bankens aktiver og en del af passiverne overføres til en ny bank under Finansiel Stabilitet A/S. Read more

The lesser-spotted variegated burdensharing for senior bondholders

So Ireland has been busy threatening to throw senior bank debt investors under a bus. Again.

Earlier this week, Irish finance minister Michael Noonan announced plans to force “substantial” burdensharing for investors in the senior debt of Anglo Irish Bank and Irish Nationwide . As a reminder, senior debt investors have traditionally ranked above sub-debt and pari passu (the same) with depositors in a bankruptcy. Forcing losses on them has therefore been a very rare event. Read more

Whoops! Ring-fencing retail banks could backfire

Regulatory snafu anyone?

The UK’s Independent Banking Commission (IBC) recommended in April that banks start ‘ring-fencing’ their retail operations so that large banks are able to fail without endangering depositors. That is, so-called ‘universal banks’ that provide both investment banking and retail operations will have to have retail subsidiaries, with separate and sufficient ‘ring-fenced’ capital to cover their own liabilities. Read more

Why Irish burden-sharing is talking out its backside

First, it was Allied Irish Banks, and a capital structure which had egregiously flipped to favour equity over credit.

Now, as of Tuesday, it’s spread to Bank of IrelandRead more

ESM seniority, from haircuts to scalpings

So the European Stability Mechanism will rank senior to other bondholders, but not explicitly so:

May 18 (Bloomberg) –The euro area’s planned permanent debt-crisis mechanism will probably refrain from detailing its seniority status in lending contracts, following the practice of the International Monetary Fund, said the head of Europe’s temporary rescue facility. Klaus Regling said a political commitment exists in Europe to let the future entity, the European Stability Mechanism, “claim seniority just below the level of the IMF seniority but above everybody else.”

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How do you say bail-in in Swedish?

Those who don’t keep up with Danish legal proceedings might have missed this development.

Last week, the country’s lawmakers sat down to debate a tweak to the country’s Bankpakke III bailout (or should that be bail-in?) bill. The change would promote private buy-outs of troubled banks, with the help of funds from Denmark’s deposit guarantee, thereby sidestepping some of that bail-in requirement. Read more

Morgan Stanley wants you to pay more attention to seniors

Seniors have had a hard time of it lately.

They’ve been usurped by a trendier generation, buffeted by changing times. Now Morgan Stanley analysts want you to consider this frail group. They want you to … focus on senior bank debt, of course! Read more