Morning Equity Briefing |
Banks
Rehn reiterates EU's stance on senior debt
Emer Lang
FACTS: Comments by EU economics commissioner Olli Rehn on February 15th confirm that Europe is set against the imposition of losses on senior bondholders in Irish banks.
ANALYSIS: Uncertainty over the fate of senior bondholders (there is €17bn of senior unsecured, unguaranteed debt outstanding) has been fuelled by opposition politicians as the election looms on February 25th. According to Commissioner Rehn, 'it is certain that there is simply no appetite for considering senior debt bondholders in this context because we want to avoid any kind of potential contagion effect'. He added that 'therefore, this issue is not on the table and that was made very clear yesterday in the meeting of the Euro Group'.
DAVY VIEW: With Irish banks relying on the ECB for €132bn of liquidity support at the end of January, it is clear that Ireland cannot go against the wishes of the EU. Elsewhere, a report on RTE suggests that discussions between Ireland and officials from the EU and IMF are focusing on the possibility of banks selling loans of about €100bn as part of the required 'deep restructuring' of the Irish banking system. Firm proposals are likely to await the results of the Prudential Capital and Liquidity Reviews (PCAR and PLAR) due to be completed by the end of March.