PUTTING CREDITORS ON THE HOOK

"The rules are really serious".  Yep, got that.  This is the quote in Friday's FT in an article by Jim Brunsden entitled EU regulator defends rules of failing banks. This article explains that tough rules for failing banks are meant to be tough and should not be reconsidered.  They are in essence, a game-changer.  Elke König, head of the Single Resolution Board, said recent banking market volatility was in part a sign that the rules are really serious now. Examples of the rules biting include the messy round of write-downs of Novo Banco senior debt in January and Italian calls for a revision of the implementation timetable.  The rules are known officially as the Bank Recovery and Resolution Directive and came into effect January 1st 2016.  

Essentially, previous rules in effect targeted junior creditors, such as CoCo investors.  Now with the SRB in a position of influence and passing of the EU legislation, senior creditors should take note too.  Essentially, to be clear, bail-ins in senior debt is on the table in effort to assuage systemic concerns.  

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