This was deemed a credit event, so credit default swaps were exercised anyone who insured against default had to pay out.

Consequently, credit growth remains unchecked until an unforeseen event triggers China s Lehman moment.

Rating agencies would consider this debt exchange a credit event, but only for a very short period a matter of a few weeks.

Ecuador needed to go all the way to a credit event in December 2008 to be able to purchase the bonds at bargain prices.

Likewise, the ECB should have barred banks from the risky CDS market, where they are held hostage to ratings agencies decisions about what constitutes a credit event.

Usually, the bank takes months to process the application, and may demand a bribe even in the unlikely event it is willing to take on the credit risk.

Risk is reduced because credit secured by assets gives creditors access to the assets as another source of payment in the event of non payment of the secured obligation.

Sovereign cocos have the advantage that their activation would not constitute a credit event triggering the credit default swaps written on the bonds. The existence of large quantities of CDS, together with uncertainty about who has written them, has fed the reluctance to proceed with restructuring.

Credit Where Credit is Due

Credit

Credit

Indeed, the most curious aspect of the ECB s position was its threat not to accept restructured government bonds as collateral if the ratings agencies decided that the restructuring should be classified as a credit event.

Event Source

Event Sink

Event specification

Start Event

Intermediate Event

End Event

Event monitor

Event Monitor

Side event

Treaty event

Pledging event

Treaty event

Unfreezing Credit

Photo Credit

Rural Credit

Financial Credit

This way public credit registries and credit bureaux may be able to operate and provide adequate and up to date electronic credit information.

Start Event Message

Start Event Timer

Start Event Rule

Start Event Link

Start Event Multiple

Intermediate Event Message

Intermediate Event Timer

Intermediate Event Error

Intermediate Event Cancel

Intermediate Event Compensation

Intermediate Event Rule

Intermediate Event Link

Intermediate Event Multiple

End Event Message

End Event Error

End Event Cancel