No haircuts for senior bondholders at banks

SENIOR bondholders in Irish banks escaped the bailout without taking a hit yesterday.

Finance minister Brian Lenihan said the government needs to impose “big haircuts” on junior bondholders but said there was no appetite for forcing losses onto senior holders. European finance ministers decided, as expected, that imposing haircuts would have a detrimental effect on markets.

German Chancellor Angela Merkel has been pushing for investors who gain from exposure to banks to take a share in the risk if they run into trouble.

Irish Prime Minister Brian Cowen said: “In relation to the question of senior bondholders, there is no agreement from the European Union for [shifting losses] because of the impact we believe it would have in relation the stability of the entire financial system itself and the impact it would have across European banking generally.”

Ireland said two years ago senior bondholders would not take a hit if banks ran into trouble.