Battle With Bondholders Looms After G-20 Agrees on Basel Rules

The next hurdle to bank reform is looming after U.S. President Barack Obama and other Group of 20 leaders endorsed the Basel Committee on Banking Supervision’s new rules in South Korea last week: the bond market.

Regulators worldwide, seeking to protect taxpayers from having to foot the bill for future bank bailouts and to cushion big lenders in times of stress, will now turn their attention to preventing the collapse of systemically important financial firms. Among the tools they’re considering are capital instruments that would force investors in bank debt to bear the cost of a bailout by slashing the value of their bonds or converting them to equity in a crisis.