Nov. 1 (Thomson Reuters Accelus) - The collapse of MF Global Holdings is the first major U.S. financial bankruptcy since new Dodd-Frank insolvency laws ended the doctrine of “too big to fail,” as well as being the first U.S. failure attributable to the Euro crisis. While the collapse is expected to be handled under pre-Dodd Frank bankruptcy laws and under the Securities Investor Protection Corp., it may signal that regulators are prepared to take earlier action when they see uncovered financial risks.
The default follows agreement last week by EU heads of state, which required banks to increase capital by 106 billion euros to restore confidence. This is based on a higher capital ratio of 9 percent of highest quality capital, after a buffer for the mark-down of sovereign debt value of periphery EU States to current market values. Banks and private sector creditors to Greece accepted 50 percent voluntary write-down, as part of the package. (more…)