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
The irony police dropped by FT Alphaville on Tuesday. They asked us to reverse back to the last European bank bailout before Cyprus: the nationalisation of Dutch financial group SNS Reaal. The government of the Netherlands, complete with a finance minister by the name of Jeroen Dijsselbloem (have you heard of him?), used their freshly minted Intervention Act to expropriate the shareholders and subordinated bondholders in order to help finance the February 1st nationalisation. Read more
The latest bank-sovereign crisis always gets the most attention. Despite the best of intentions, no amount of preparation can get the current flair-up ready to have its place in the limelight stolen. Once torn, salt is rubbed into the wound by means of nasty comparisons that disrespect the unique nature of one’s distress. Ireland is not Greece! Portugal is not Ireland! Italy is not Spain! And Cyprus is special because of gangsta finance and its reliance on deposits for funding…
Grow up. Everyone has problems.
That said, we’ve carved out a special place in our schedules this morning to spend some quality time with one of the middle children. Aren’t we good? And so to the Netherlands, where the government nationalised SNS Reaal, the parent company of SNS Bank, on February 1st. It used its shiny new Intervention Act and everything. Read more
FT Alphaville is currently experiencing a sensation of rubbernecking around the recently nationalised Dutch financial group SNS Reaal.
With two separate wrecks on either side of the motorway to gape at, it’s hard to look away. On one side, there is all that went wrong with the financial group, and its ultimate fate. With a turn of the head, there are credit derivatives referencing SNS Bank for which payouts were triggered when the government swooped in.
Here, we digest news of the arrest of another suspect in an investigation into alleged fraud at the Property Finance unit of SNS Bank. This reached us on Wednesday courtesy of Vasco van der Boon reporting for Het Financieele Dagblad (FD). The failure of SNS Bank is in many ways the failure of this unit, so it’s worth a bit of a history lesson before proceeding to the actual allegations. Read more
The nationalisation of the fourth largest bank in the Netherlands is proving to be a pain for the credit derivatives market. It’s only by virtue of the small number of contracts outstanding that referenced SNS Bank that this hasn’t been making more headlines and causing more consternation.
The Isda Determinations Committee has already declared that the expropriation of the subordinated debt of the bank was a restructuring credit event, and that there might be some auctions to determine payouts under the swaps. But it looks like that result of the auctions could prove a bit farcical, with buyers of protection walking away with very little compensation for the total loss experienced by subordinated debt holders. Read more
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
We’re confused about the restructuring credit event that the Isda determinations committee voted for on Wednesday. It took them three meetings to do it, and Bank of America Merrill Lynch doesn’t agree, but there you go.
Oh, and the Q&A document that Isda published about CDS written on Greece has a line that appears to be in contradiction to decision, but there you go… Read more
SNS Reaal’s sub expropriation was a restructuring credit event after all, according to 14 of the 15 Isda determinations committee members on Wednesday:
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
There can’t be many credit default swaps written on freshly nationalised SNS Bank. It isn’t among the publicly reported top 1000 single-entity CDS published by DTCC.
Nonetheless the question of whether the Dutch government’s expropriation of SNS subordinated debt constitutes a credit event, triggering payouts on the derivatives, is being debated on Tuesday by the Isda Determinations Committee, which serves as the ultimately arbiter in such cases.
By which we mean, they are debating it again — they decided the first time around to defer the question to get more information or something.
But why should anyone care about some contract that so few parties have an interest in?
Some possibilities below. Mentally circle any that apply. Read more
Raise your hand if you didn’t first hear about the way in which the Dutch government took over ailing SNS Reaal on February 1st and think ‘oh, really now?’ along with an arched eyebrow.
The mechanics of the takeover are interesting indeed, but given that two of the four largest Dutch banks have been nationalised, we have a bigger picture question:
How much warning was there that SNS Reaal was on the brink? Read more
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