The first bail-in under new European rules has taken place. A little more than a week ago Heta Asset Resolution’s bondholders had no choice but to take their losses, as the Austrian regulator ordered for 54% of its debts - 100% in the case of junior (subordinated) bonds - to be written off. Bondholders will also no longer receive interests from the bank. The ‘bad’ bank was formed following the nationalisation of Hypo Alpe-Adria-Bank International and given its status because the bank’s portfolio was chiefly made up of risky loans from Eastern European countries. Bondholders who lent money to the bank knew that it was a risky bet.
This is in stark contrast with developments in Slovenia where subordinated bondholders in six Slovenian banks were expropriated as a result of a bail-in that consisted of a complete wipe-out of all subordinated bonds, including those sold over the counter to retail investors.