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Bondholders can sometimes be their own worst enemy. The actions being pursued by holders of Irish bank debt are certainly not going to win them many friends. On several levels, they are unreasonable, and run the risk of making a bad situation worse.
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Senior bondholders must acknowledge their place in the recovery waterfall — and realise that going concern haircuts are not completely out of line.
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The latest difference of opinion between ratings agencies could lead to wide ratings differentials for the world’s biggest banks. Unsurprisingly, there are worries that this will encourage ratings shopping. But blind consensus ought not to be the aim either. As Wall Street’s Gordon Gekko might have said, disagreement is good.
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Necessity, not curiosity, should be the driver of bank capital deals now.
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In a surprisingly simple deal, Anglo Irish last week secured funding from a Swedish pension fund. But dealers — and Irish borrowers — should not get too excited: for many investors, Irish risk remains prohibitive.
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While Crédit Agricole is to be congratulated on its cleverly engineered lower two deal priced on Tuesday, it goes completely against the grain of what Basel is supposed to be trying to achieve: a simpler banking system, with bank capital instruments that are easy for investors to understand.
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Lloyds Banking Group’s foray into yen denominated RMBS is a positive step for the market, but it’s also a reminder that the investor base remains highly concentrated.
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In the second editorial about Switzerland’s plans for contingent capital, EuroWeek reasons that the Swiss market is the ideal place for the new CoCo revolution to take root.
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In the first of two editorials about Switzerland’s plans for contingent capital, EuroWeek argues that the country’s proposals to address the problem of too big to fail banks are a breath of fresh air in the disjointed international debate. Other regulators would be wise to study them closely.
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By looking after banks’ senior bond investors, the Irish government has given itself a chance — albeit a slim one — of getting the financial system back on its feet.