Swaps body asked to rule on Irish default swaps

The International Swaps and Derivatives Association (ISDA) has been asked to decide whether a "restructuring credit event" has occurred on credit default swaps insuring Irish government debt.

An anonymous request posted on the trade group's website this week pointed to Ireland's bailout last year by the European Union and the International Monetary Fund, which may have made the Washington-based organisation a preferred creditor.

"In the event that the Republic of Ireland is unable to meet its financial obligations at some point in the future no one denies that the IMF loan will be repaid first or that bondholders will not receive scheduled payments if the IMF loan is in arrears," the request on the ISDA's website said.

"From a practical perspective the existing Irish bonds have become subordinated to the IMF loan."

Ireland was forced to request an 85 billion euros bailout amid concerns mounting losses within its banking sector would sink the sovereign.

The bailout has failed to convince investors that Ireland has a handle on its financial crisis and there are fears it may default in the future unless a new government can wring concessions from EU partners on the terms of the loans and get additional help to deal with the banks.

Prime Minister Enda Kenny failed on Saturday to get a cut of 100 basis points in the average 5.8% rate of interest charged on some 40 billion euros plus of loans from Europe after he refused to agree to a common corporate tax base in the region.

Kenny is hoping a deal can be reached with Europe at a March 24-25 summit aimed at hammering out a comprehensive agreement on resolving the bloc's debt crisis.