ABI boss warns banks: 'Mess with insurers at your peril'

ABI chief executive Otto Thoresen has warned banks against short-changing insurers over their current bondholdings.

Large insurance groups have been angered by multi-billion euro bond exchange programmes launched this month by lenders including Banco Santander and BNP Paribas.

Insurers, backed up by analysts, believe that the bond exchanges are on less favourable terms for the insurers and could even allow banks to book fourth quarter profits on the back of the swap.

Insurers hold an estimated one trillion assets under management, and are among the biggest buyers of bank bonds.

If they feel cheated, they could go on a buyers’ strike. That could bring banks, which are already suffering under the enormous pressures of the eurozone crisis, to their knees.

Thoresen told the Daily Telegraph: “Such tensions will clearly impact on continuing relationships and raise into question the implications for individual banks future access to capital debt markets.

“This is an important issue in light of future capital and debt refinancing requirements for the banking sector in the coming months.”