Episode Details

In August 2013, the European Commission published a document that changed the risk profile of every subordinated bank bond in the eurozone. Four months and seventeen days later, Slovenia used it to wipe out two thousand retail investors overnight. The document was public. The bank's capital shortfall was documented since 2011. The resolution statute had no pre-execution challenge right. All three were readable before December 2013.

This episode is the due diligence framework a GP or LP should apply to any subordinated bank debt position where the resolution framework, the sovereign's fiscal position, and the bank's capital adequacy combine to create bail-in risk the yield spread does not compensate for.

We cover: the three variables that converged in December 2013 — EU framework, capital shortfall, resolution statute gap — the three diagnostics that identified the bail-in before it was executed — the active red flag in AT1 instruments post-Credit Suisse 2023 — and the four questions any fixed income allocation should answer before taking subordinated bank exposure in any eurozone jurisdiction today.

The Forensic Data Sheet is on Substack. Link in bio.

Every collapse has a pattern. We dissect it. Layer by layer.