Greek senior bank bonds plunge on Dijsselbloem bail-in comments

Senior bonds of Greek banks tumbled after Euro-area finance ministers protected depositors from any losses in the nation’s 86 billion-euro ($96 billion) bailout.

Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem said on Friday depositors will be shielded from any losses resulting from the restructuring of the nation’s financial system. The decision puts senior bank bondholders in line for losses if Greek lenders tap into any of the financial stability funds set aside in the new bailout.

“Bail-in of depositors will be explicitly excluded” from European Union rules to make private investors share the cost of fixing troubled banks, Dijsselbloem told reporters after the six-hour meeting in Brussels on Friday.

Eurobank Ergasias SA’s senior unsecured 4.25 percent June 2018 bonds dropped 32 percent to 37 cents on the euro at 9:55 a.m. in London. Piraeus Bank SA’s senior unsecured 5 percent March 2017 bonds plunged 27 percent to 38 cents, while Alpha Bank AE’s senior unsecured 3.375 percent notes due June 2017 dropped 15 percent to 58 cents, according to data compiled by Bloomberg.

Greece’s euro-area creditors made adoption of the European Union’s Bank Resolution and Recovery Directive, known as the BRRD, a precondition of the bailout. The directive makes it easier to impose losses on senior creditors.

[Bloomberg]