ABI warns on bail-in capital

FORCING bank bondholders to absorb losses from a bank crisis is risky and will impose heavy losses on Europe’s pensioners, the Association of British Insurers warned yesterday.

Turning bank debt into contingent capital would prevent investors matching it against long-term products such as annuities, while failing to respect existing debt contracts may destabilise secondary markets, the ABI said.

“Fixed income investors have limited appetite for contingent capital or bail-in bonds,” its submission to the EU said, adding that the measures could restrict banks’ access to finance.