Fixed Income

Who will bear the brunt of bank bailouts?


Peter Fullerton

Peter Fullerton

Credit Analyst

Banks used to be considered as relatively low risk investments, braced by a complex array of regulatory requirements and oversight, rating agency scrutiny, stress testing and the apparent willingness of Governments to bail out major banks if they ever got into trouble. In hindsight, the significant trauma experienced by the US and European banking system during the GFC and more recently with the banking crisis in Cyprus, it is clear that certain banks were more risky and complex investments than was originally thought. In this article, we provide some colour around why banks fail, what the implications are for investors when banks fail and how the Australian banks appear to be placed in the current environment.

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