What bank investors need from authorities is clarity. A concerted,
pan-European drive to inject capital might provide it. As US fund
manager John Hussman has suggested, that injection could be achieved
via a “super-bond”, countable as capital and subordinate to customer
deposits, but ranking ahead of both shareholders and even senior
bondholders in the event of bankruptcy. That super-bond would pay a
high rate of interest, giving banks an incentive to switch to cheaper
funding. But interest payment could be deferred until the bank hit a
minimum level of profitability.
From Lex in today’s FT. Read the proposal in full here.