Solvency

Back on bailout plans granted to countries in the Euro zone encountering severe fiscal deficits since May 2010. How are tens of billions Euros raised, what are they for, and mainly, are those amounts enough to re-establish the public finances and stabilize those countries banking system.

The aim of this short article is to set the ideas straight regarding the Greek situation. Several issues are considered, the first of which being that of economic growth. If the latter does not make any progress, it will be very difficult to reach public finance stability. The second issue is about helping the Greeks improve their situation and the final issue deals with renewing that support.

If Greece is allowed to default now, the risk of a confidence crisis and contagion is substantial. The debt of other weak eurozone countries may fall victim to speculators and the market for credit default swaps could experience difficulties again

Rethink monetary policy and its objectives, reform our accounting and prudential environment, review the return on equity standards, regulate the prices of certain assets...

The results of QIS 5 confirmed that convertible bonds bear low capital cost. A balanced-profile convertible bond portfolio with optimized convexity therefore obtains a moderate intrinsic SCR whilst benefiting from «equity» exposure.