Reuters: UK says no longer can alter banks' bond terms

"Credit analysts said the Treasury letter was unlikely to reassure the market that the government would not change the ground rules for bank debt in future." Credibility, once gone, is hard to get back. Bank debt is now viewed as liable to original contract default, as the government have established a precedent to "write off contract law", or worse, swapped unilaterally for equity(bank ownership...ugh). No wonder Mervyn thinks even yet more bailouts will be required, as they are playing fast and loose with alternative funding sources. On the plus side, better that somebody other than the taxpayer gets ripped.