Bankers And Bonds

From a historical point of view, the main activity of investment banks is what today we call security underwriting. Investment banks buy securities, such as bonds and stocks, from an issuer and then sell them to the ?nal investors. In the eighteenth century, the main securities were bonds issued by governments. The way these bonds were priced and placed is extraordinarily similar to the system that inve- ment banks still use nowadays. When a government wanted to issue new bonds, it negotiated with a few prominent “middlemen” (today we would call them investment bankers). The middlemen agreed to take a fraction of the bonds: they accepted to do so only after having canvassed a list of people they could rely upon. The people on the list were the ?nal investors. The middlemen negotiated with the government even after the issuance. Indeed, in those days governments often changed unilaterally the bond conditions and being on the list of an important middleman could make the difference. On the other hand, middlemen with larger lists were considered to be in a better bargaining position. This game was repeated over time, and hence, reputation mattered. For the middlemen, being trusted by both the investors on the list and by the issuing governments was crucial.

This book illustrates the importance of bonds as a funding tool available to banks. After providing the reader with an overview of the funding strategies adopted during the last ten years by European banks, the book offers a deep focus on the Italian banking industry. Notably, the authors illustrate how bonds have been a primary funding choice for Italian banks, as well as a preponderant asset in Italian households’ portfolios. Furthermore, they highlight the consequences of the adoption of the Bank Recovery and Resolution Directive (BRRD) on the yields offered by bonds of Italian banks. Finally, they conclude the volume with the illustration of very recent case studies about the application of the BRRD to some problematic banks in Italy and the related side effects generated to bank bondholders. All the analyses presented in the book are supported by the use of quantitative data.

Bonds without Borders tells the extraordinary story of how the market developed into the principal source of international finance for sovereign states, supranational agencies, financial institutions and companies around the world. Written by Chris O'Malley – a veteran practitioner and Eurobond market expert- this important resource describes the developments, the evolving market practices, the challenges and the innovations in the Eurobond market during its first half- century. Also, uniquely, the book recounts the development of security and banking regulations and their impact on the development of the international securities markets. In a corporate world crying out for financing, never has an understanding of the international bond markets and how they work been more important.Bonds without Bordersis therefore essential reading for those interested in economic development and preserving a free global market for capital.