Secondo un analista di BofA la nazionalizzazione delle banche, con l'ingresso dello stato nel capitale delle stesse, non sarebbe di per sè sufficiente per fare scattare le clausole di risarcimento dei CDS.
Bank Nationalizations May Not Trigger Default Swaps (Update1)
By John Glover
Jan. 22 (Bloomberg) -- Governments would need to take over all the assets of a bank and take charge of daily operations for a nationalization to trigger payouts on credit-default swaps, according to Bank of America Corp. analysts.
Simple nationalization wouldn’t be enough to settle the derivatives, which protect investors against a company defaulting on debt repayments, New York-based strategist
Glen Taksler wrote in a note today. A collapse in share prices of New York-based
Citigroup Inc. and
Royal Bank of Scotland Group Plc is stoking speculation the U.S. and U.K. will be forced to take full ownership of some financial institutions.
“It’s worth noting the high threshold that would be required for bank nationalization to trigger credit-default swaps,” New York-based Taksler wrote in the note. “Simply taking a substantial ownership stake through equity is not enough.”
Events last year provide a guide to what may have to happen to trigger payouts on the contracts, Taksler wrote.
In the U.K., the nationalization of
Northern Rock Plc in February 2008, which had the first run on a British lender in more than a century, didn’t prompt payments on credit-default swaps. This was because the government took over the bank’s equity and not its debt, agreed to manage it at arm’s-length and stated the institution was solvent, the note said.
A statement that a lender is insolvent may be required to start the process of paying out on default-swap contracts, he said.
Bradford & Bingley
Because
Bradford & Bingley Plc, which was nationalized last year, wasn’t considered by the U.K. government to be definitely unable to meet its obligations, credit-default swaps on the Bingley, England-based lender weren’t triggered, Taksler wrote.
However, when the U.S. government took over mortgage-finance companies
Fannie Mae and
Freddie Mac in September, it placed them into conservatorship, which did trigger default swaps, Taksler said.
More than $1 trillion in losses and writedowns by financial companies around the world are weighing on banks’ stock prices and their ability to repay debt.
Citigroup fell 45 percent in New York trading this year, RBS, based in Edinburgh, lost 72 percent and
Lloyds Banking Group Plc slipped 57 percent. The U.S., U.K. and other nations implemented bank-rescue packages including asset buyouts and debt guarantees seeking to unfreeze lending.
Anglo Irish
Ireland seized control of
Anglo Irish Bank Corp., the nation’s third-largest bank, on Jan. 15 after a scandal that forced the resignations of its chief executive and chairman.
Credit-default swaps on RBS fell seven basis points to 145, according to CMA Datavision at 12:15 p.m. in London. Barclays narrowed to 190 from 198 and
Lloyds fell to 130 basis points from 137. Anglo Irish widened to 422.5 basis points from 415, according to CMA.
Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said yesterday the new administration will take “ substantial action” to stabilize the banking system and ensure credit reaches small businesses.
Geithner indicated the administration is looking at using some type of a “bad,” or “aggregator” bank to remove toxic asserts from bank balance sheets. He gave no indication he’s planning outright government takeovers.
Credit-default swaps are contracts for protecting bonds against default and are used by traders to speculate on changes in credit quality. The swaps pay the buyer face value in exchange for the underlying securities if a borrower fails to adhere to its debt agreements.
A basis point on a credit-default swap contract protecting 10 million euros ($13 million) of debt from default for five years is equivalent to 1,000 euros a year.
To contact the reporter on this story:
John Glover in London at
[email protected]
Last Updated: January 22, 2009 07:34 EST
