Restructuring banks: Don't start from here | The EconomistAS IRELAND grapples with its banking crisis, distant Kazakhstan, which dealt with its own blow-up in February 2009, offers an interesting lesson. The Kazakh restructuring, completed in September this year, is unusual because instead of getting a state guarantee, the majority of the creditors of BTA Bank, the biggest problem, shared the pain. Even senior bondholders, who are high in the pecking order, were hit. In most other countriesincluding Ireland, so farthey have been wrapped in cotton wool, at taxpayers expense.
Most BTA creditors were offered a menu of options which included a haircut on their assets, various combinations of senior and subordinated debt, and a small stake in the banks equity to keep them interested in its future. The government faced down those who warned that, if senior bondholders and trade creditors were included, the market would ostracise Kazakhstan for years. Around $12 billion of bonds and commercial debt was reduced to $4 billion. The external debt of the Kazakh banking sector, which was 26% of GDP when the crisis struck, has been roughly halved.
Could someone pass this on to Lendahand and biffo?!
oh, and ye FF apologists here should have a good read.