More on TIER capital issued by banks

Escrito el 3 febrero 2009 por Antonio Rivela Rodríguez en Uncategorized

As you may remember we talked about TIER capital issued by banks in our last blog.
To cut a long story short, Bloomberg has just published a nice article on the matter.

Basically they agree with our prior opinion. They believe that if banks are nationalised, Governments will be tempted to default in their TIER1, Upper TIER 2 obligations.

That explains how TIER obligations like the ones issued by RBS have fallen to 10% (by 90% I mean).

Just to clarify: Lower Tier 2 or the so called subordinated debt does not run this risk, because debt needs to be serviced or that would trigger a default.

Feb. 3 (Bloomberg) — Bond investors


P. Leesinsky 3 febrero 2009 - 12:22

My wife and I have invested heavily in a Dresdner bond that pays a coupon of over 8% and matures in 2032. The value of this bond has dropped to less than 50 cents on the dollar. I cannot find any source that will tell me if these bonds are hybrid in the sense that interest can be deferred and I am concernd that Dresdner Bank itself has been bought up by one of the larger German banks, Commerz I believe. Is there anyone who could advise me on the quality of my Dresdner bond and whether it is also in the predicament that the government may decide not to pay the interest that I will depend on to retire?

Worried Investor.

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