Part of the received wisdom is that Anglo’s foreign bondholders cost us all a fortune. They didn’t.
Anglo was in fact the most conservative of the banks in its funding, issuing relatively few bonds. Most of its funding was obtained in the old fashioned way – by attracting deposits, albeit by offering above-market interest rates.
As of September 30th, 2008 it had €71.9 billion on deposit, according to its annual report for that year. It has just €10 billion in senior bonds outstanding, which, as it happens, was roughly equal to the bank’s capital.
Had Anglo been liquidated there and then, the many people with their life savings in the bank would have lost everything over €100,000. So would the 11,000 non-retail account holders – companies, charities, universities, pension funds and credit unions – who had more than €30 billion on deposit in the bank. So would the other banks, which had €20 billion deposited.
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Companies and not-for-profit organisations keeping cash on hand to make payroll would have been unable to transfer wages and salaries into employees. Many companies would have gone under having been rendered illiquid, insolvent or both by the loss of their cash. The direct contagion effect to other banks would have been immediate.