Debt transferred to BES is not a failure – publico

                 

                         
                     

                 

 
 

The holders of debt securities that at the end of last year were transferred from New Bank for BES may not enable a kind of default insurance (the so-called credit default swaps ) concluded the international organization that decides on these cases.

the International Association of Swaps and derivatives (known by its English acronym ISDA) has been putting off the decision on whether to that debt transfer to the “bad bank”, which was determined by the Bank of Portugal, can be considered a failure by government intervention, a condition that would allow creditors to enable insurance. After inconclusive meetings by a committee that brings together some of the major global banks, the association hired an external panel of three lawyers to decide the case.

That panel ultimately concluded that the creditors will not resort to credit default swaps . “A transfer is not essentially similar to a cancellation, a conversion or exchange,” reads a report released on Monday. “We conclude therefore that the position of ‘no’ is the best answer.” Also the Committee had tilted in favor of the “no”, but 11 votes in this direction (against four “yes”) were one vote short of the need for it to be a decision.

The case relates is directed to the transfer of obligations arising five debt issues that have been made by BES to institutional investors (banks, insurance companies, funds). This debt initially went to the New Bank (bringing together the healthy assets of bankrupt BES), but eventually returned to BES in December last year. For the New Bank, the transfer of the debt meant an improvement in the accounts, having had a positive impact of 1 985 million euros.

At the time, the Bank of Portugal justified the measure by the need to ensure ” losses of Banco Espírito Santo, SA are absorbed in the first place, the shareholders and the creditors of that institution and not by the banking system or the taxpayers. ” Although the debt issue has been made to institutional investors portion was eventually resold to private clients.

In a separate case, the International Association of Swaps and derivatives is also examining if there is a succession of event in which one entity succeeds in responsibility for other duties. a decision on Thursday is scheduled.