By the end of 2021, European banks must decide what to do with billions of dollars’ worth of arcane bonds that are causing concern for regulators. The worry is that these so-called legacy bonds could wreak havoc with other securities and provoke legal spats. It’s another ripple from the global financial crisis, though one that offers potential rewards for intrepid investors.
1. What are legacy bonds?
They are mainly “Tier 1” subordinated bonds that were sold before regulators rewrote rules in the wake of the 2008 crisis to strengthen bank finances. Holders of subordinated bonds are low on the list ...
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