Saturday, 25 June 2011

Heads we win, tails you lose

The good news for lawyers advising the ECB and EZ ministers is that they may just have figured out how to roll over Greek debt without triggering a credit event or default in the near term.

The bad news for many banks, especially those in the US and UK according to some reports (for example here), is that the CDS contracts which were supposed to insure them against any debt re-structuring may not be worth the paper that they are written on.

In the meantime they will just have to sit on deteriorating collateral, for which there are no bids. But from the bankers point of view the end game of course will be that should the whole EZ sovereign turn out as badly as many fear, it will be deemed to be another TBTF risk and the inter-generational theft wheeze will continue.

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