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Old 17th Mar 2013, 14:57
  #62 (permalink)  
Al R
 
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Lord Masher

That answer is easy.. in 2018, the new European 'bail in' regime takes effect! Big Brother will be getting even more hamfisted.

http://www.genevaassociation.org/PDF...d&Le_Lesle.pdf

The great difference between US and EU is that in US depositors are senior to bondholders. I mentioned the corporate bond holders and not anyone liable for Corporation tax because those are the people who take informed risk; not the retired plumber or nurse from Limassol.

Corporate bondholders cannot claim to be shocked if they lose money and they have been clobbered in Ireland and particularly last month, with SNS Reaal in Holland. Some investors there had investments taken off them outright - because they no longer had ownership, they couldn't claim protection via credit-default swaps.

SNS Reaal Investors Won

Bizarrely almost, demand for a new class of subordinated debt is strong; capital bonds (co-co's) are new debt instruments that either convert to equity or get written down/off when the issuer falls low on capital. Barclays, UBS and (I think) The Royal Bank of Scotland are issuing them. You might argue that as red ink disappears slowly off balance sheets, they make sense.

But the fact that cash rich Asians are predominantly buying them, you have to wonder about the due diligence, and therefore, the logic and sense.
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