Bank bond rating bloodbath as investor bail-ins replace bailouts

Tim Wallace
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THE VAST majority of banks’ hybrid bonds are being downgraded as it becomes clear governments really mean they will not bail out troubled lenders in future, ratings agency Standard and Poor’s said yesterday.

In total, 88 per cent of European banks’ 1,200 hybrid securities will be downgraded. This will happen even though the bonds had previously been given a higher rating because governments had traditionally stepped in to protect bondholders when a crisis struck.

But from next year, the burden will start falling on investors who will have to stump up instead of the taxpayer.