The cost of protecting bank bonds from default has fallen to the lowest level in as much as 20 months, pushed down at the same time regulators are loosening reserve rules and measures aimed at staving off another credit seizure.
Irish Finance Minister Brian Lenihan warned holders of bank bonds last month that they will have to share the pain of rescuing the country’s financial industry. When a new government takes over, more investors may get hurt.
Bank subordinated securities that regulators are proposing to phase out will probably rise as they become scarcer and issuers buy them back, according to Hank Calenti, an analyst at Royal Bank of Canada.
Lloyds Banking Group Plc , Britain’s biggest mortgage lender, forecast “good” 2010 results without disclosing figures, prompting calls for the government- controlled bank to match the financial reports of its peers.
European banks may have to raise as much as 80 billion euros ($112 billion) of additional capital as the stress tests failed to allay investor concern about a Greek default and governments’ ability to bail out their lenders.
A committee of credit-default swaps traders will expedite an auction to settle about $3 billion of contracts tied to Greece after the nation took steps to force investors to participate in the biggest sovereign-debt restructuring in history.
Spanish lenders face the prospect of needing as much as 12 billion euros ($15 billion) of extra collateral for their central bank loans, raising pressure on the banks as they negotiate a 100 billion-euro bailout.