Far from encouraging the use of subordinated debt, the Basle standards actually discriminate against it.
Setting a price for derivatives that have been repeatedly repackaged, overcollateralised and subordinated is difficult in any conditions.
ECONOMIST: An accounting standard comes under the microscope
But it's still unclear whether it can impose losses on unsecured debt, such as bonds and subordinated debt.
Around 60% of subordinated Spanish bank debt, excluding the healthy Santander and BBVA, is held by retail investors.
This raises concerns that the interests of public shareholders may be subordinated to those of the Chairman and co-founders.
If a bank were free to issue such subordinated debt at any yield, the scheme would not quite do.
Even so, financial institutions have sold just two subordinated euro bonds this year.
In this world, efficiency is considered important but subordinated to the values of delighting customers, transparency and continuous improvement.
So the yield on this subordinated debt should reflect the market's assessment of the risks the bank is taking.
Because the incentives of subordinated-debt holders are closely aligned with those of the deposit-insurance fund (and hence of taxpayers).
With national interests subordinated to the whims of bureaucrats in Brussels, Europe does little of value in the international arena.
Tom has subordinated his individuality to the greater good but Grantham needs assurances that the greater good includes fealty to tradition.
In many instances, like Federated Department Stores, the companies survived but the subordinated creditors and sponsors lost a lot of money.
"The SNS example underlines the fact that when banks go bust, subordinated bondholders should expect to take losses, " Mr. Bennett said.
Others reckon the biggest risk for European subordinated bank debt is market volatility, rather than the possibility bondholders will suffer losses.
Disclosure: At the time of publication, the author was long Blockbuster Senior Subordinated notes, although positions may change at any time.
Single-issues groups often tend to see all spheres of life including the judicial one as subordinated to the truth they preach.
Though the bank denied the reports, it postponed a planned issue of subordinated bonds with which it was to strengthen its capital.
The number of small savers involved makes it different to bailed-out Ireland, where subordinated debt holders took losses of up to 80%.
At this point, they would also have to stop paying interest on their preferred subordinated debt, since this cannot be paid before dividends.
Under Basel III rules now being formulated, market participants are expecting certain types of subordinated debt to count toward a bank's loss-absorbing capital.
But there is not enough equity and subordinated debt to absorb the losses, so depositors would somehow have to be bailed in too.
Investors will buy subordinated debt at a yield quite close to the riskless rate only if they are sure the bank is low-risk.
Since subordinated debt has less protection than senior, secured debt in bankruptcy proceedings, Triangle is able to charge higher, junk-bond rates to borrowers.
Similarly, keeping weak life insurers alive helps the country's banks, which have lent large sums, often in the form of subordinated debt, to insurers.
So, sell the subordinated bank bonds that you rode down, then rode back up and in which you now have big, fat juicy profits.
These notes were akin to subordinated debt of bank holding companies: They provided a capital cushion to help protect policyholders from any future unpleasantness.
Meanwhile, in Spain, Ireland and most recently the Netherlands, the cost of bank rescues has been partially borne by holders of subordinated bank debt.
Only one government, Argentina's, appears to rely on this sort of mechanism (and it has balked at setting a yield-cap on the subordinated debt).
Since then, analysts say some investors have concluded that the more the ECB buys of a government's bonds, the more private bondholders will be subordinated.
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