Bond investors should remember that haircuts are only a last resort in EC proposals

The EC would explore other avenues of recapitalisation for failing banks, before opting for haircuts.

After months of speculation, investors finally got the news many had been dreading. On January 6 the European Commission issued a consultation paper on a framework to deal with future bank failures, in which it made specific reference to writedowns of senior bank debt.

In some ways, the announcement could not have come at a worse time given the wall of bank bonds maturing in the next couple of years. According to Dealogic, European banks have to refinance EUR622.5 billion of debt this year and