ISDA's ruling that there was no government intervention credit event on Portugal's novo banco sparked bemusement in credit markets last week, and led to renewed claims that credit default swaps are unfit for purpose. The unanimous decision by ISDA's three-member panel means that CDS linked to €2bn of Novo Banco senior bonds transferred by the Portuguese central bank to related bad bank banco espirito santo will not pay out. The transfer led to the bonds in question losing around 90% of face value.
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