Are we wrong on bank hybrids?

Last week the Financial Times reported that investors in Spanish bank hybrids might be about to suffer the fate of the Irish. According to the report the conditions for any banks seeking bailout funds is that they write off their preference shares and subordinated debt first. A quote from the draft memorandum of understanding says: “Banks and their shareholders will take losses before state aid measures are granted and ensure loss absorption of equity and hybrid capital instruments to the full(est) extent possible." In short, the first source of cash to cover bank losses are the amounts invested by shareholders...

Last week the Financial Times reported that investors in Spanish bank hybrids might be about to suffer the fate of the Irish. According to the report the conditions for any banks seeking bailout funds is that they write off their preference shares and subordinated debt first.

A quote from the draft memorandum of understanding says:

“Banks and their shareholders will take losses before state aid measures are granted and ensure loss absorption of equity and hybrid capital instruments to the full(est) extent possible."

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