Bank Bondholders Face Euro threat: "Moody’s Considers Subordinated Debt To Be Most At Risk Under New Law"
We write so much about this issue because it really is the cornerstone of the bank bailout debate - who pays for the losses? You the taxpayer vs. the investors (shareholders and bondholders) that funded the bank. It would seem an obvious choice, but it has not played out that way, anywhere except Iceland and Denmark.
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German Bank Debt Downgraded By Moody's
Source - Bloomberg
German banks’ subordinated debt securities valued at 24 billion euros ($33 billion) were downgraded by Moody’s Investors Service on the prospect that new legislation will increase the risk of losses among debt holders.
“The new regulatory tools allow authorities to impose losses on debt holders without necessarily placing the entire bank into liquidation,” the ratings firm said yesterday in a statement. “Moody’s considers subordinated debt to be most at risk under the new law.”
Regulators and lawmakers worldwide are looking for ways to ensure that bank investors bear future losses after voters objected to using taxpayer funds to bolster financial firms. Germany’s Bank Restructuring Act was approved by the parliament on Nov. 2 and allows regulators to transfer the assets and liabilities of a failing bank while permitting the government to write down debt.
The cuts apply to 248 subordinated securities together with tranches of debt programs issued or backed by 24 banks. The average downgrade was two and a half levels, Moody’s said. The subordinated debt is unlikely to benefit from future German government support, Moody’s said.
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Feb 18, 2011 at 11:49 AM
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