Inside the world of business
Beware burnt bondholders
ANYONE KEEN to burn senior bondholders to make them share the €70 billion cost of the banking bailouts should consider the effect of such a move on the Danish banking system. Denmark became the first country in Europe to inflict losses on senior unsecured bank creditors when it imposed haircuts on senior debt at Amagerbanken, which went bust in February.
Danish insolvency rules introduced last October forced the senior unsecured bondholders to take a 41 per cent haircut. This was the first “bail-in” of this class of bank lender which is regarded sacrosanct by the European Commission and European Central Bank, fearing the chaos that such a move could spark across the euro zone banking system.
The Financial Times, which pondered the impact of Denmark’s decision earlier this week, found that smaller Danish banks faced higher funding costs as a result of the move at the Danish bank, which has been nicknamed “Armageddonbank” by wary investors.
Credit ratings agency Moody’s downgraded six Danish banks last week as it weighed the likelihood of reduced state support for the lenders following Amagerbanken.
While other European countries may be considering similar moves, Denmark may be attempting to row back on its burden-sharing as a result of its impact on the funding of smaller banks.
The Irish Government and Central Bank have ruled out burning senior unsecured bondholders in the Irish banks, which are owed €16 billion across the six lenders.
But the door has been kept ajar at Anglo Irish and Irish Nationwide. If their combined cost rises above €34.7 billion, then burden-sharing with senior unsecured bondholders – owed €3.1 billion by Anglo and €600 million by Irish Nationwide – will be considered.
Anglo’s next repayment is on Friday in the form of a €200 million bond issued in May 2008 before the banking crisis struck. The next big repayment after this is a $1 billion senior bond to be repaid on November 2nd.
The kids are alright off Facebook, says founder
CONTRARY TO popular belief, Mark Zuckerberg is not planning global domination. The 27-year- old Facebook founder told the e-G8 internet forum in Paris yesterday that Facebook has no plans to open up the world’s largest social network to children under the age of 13 at least.
Zuckerberg told a web-focused prelude to the G8 that comments he made at an eduction conference last week about the difficulty for children in signing up for the service had been taken out of context. Keeping kids safe online is such a thorny issue that even Facebook doesn’t want to tackle it.
“That’s just not top of the list of things for us to figure out right now,” said Zuckerberg.
While it may suit Zuckerberg to make such comments, the reality is much different. A UK survey in 2008 found that nearly a quarter of children aged 8-12 were getting around the age restrictions and happily using the “adult” social network. There’s little doubt that percentage will have grown in the last three years as Facebook passed 500 million users worldwide.
Facebook has become the phenomenal success it is – being valued at more than $50 billion according to recent estimates – by pushing the boundaries of users’ privacy. If we don’t share openly, it becomes of less value to other users.
If Zuckerberg were to admit that under-13s were being courted by Facebook, the privacy and security headaches he is already struggling with would become a whole lot worse.
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