June 2017 has seen three notable failures of European banks under the new bank resolution regime. The bail-in of Banco Popular in Spaincame as a surprise to some, particularly to those holding the subordinated debt (tier 2) and preference shares (additional tier 1/AT1) which traded near their issue prices until very close to the end. In the case of the two failed Italian banks the subordinated securities were trading close to zero implying failure was expected. Investors seeking to avoid losses on future bank failures can takeaway eight key lessons from this month’s examples. Like almost all business failures, the signs were there for those who knew what to look for.
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