Hybrids in the news

Caution urged on contingent capital

Bank of England financial stability paper argues policymakers would need to consider 'possibility that precautionary contingent capital instruments lead to wider systemic risks'

CRD IV: Commission asked to work on systemic risk buffers

CRD IV: United Kingdom accepts Danish compromise

Meeting on 14 May, the member states’ finance ministers unanimously adopted the Council’s general approach (which is not a legal text) on reform of capital requirements for banks (CRD IV) after the United Kingdom accepted the Danish EU Presidency’s compromise. The Council and European Parliament can now begin their negotiations on the text .

Wrapping up CRDIV negotations

Ecofin votes through new regulatory regime - and final amendments appear to give UK extra freedom - but work remains before Danish presidency ends on July 1. European authorities are rushing to agree the details of the fourth Capital Requirements Directive (CRD IV) in part due to concerns about the ability of Cyprus to wrap up negotiations after it assumes the rotating presidency of the Council of the European Union from Denmark on July 1.

Monte Paschi may issue CoCo bonds to meet EBA goal

Banca Monte dei Paschi di Siena , Italy's No 3 lender, said it could issue contingent convertible (CoCo) bonds to help plug a 3.3 billion euros ($4.2 billion) capital shortfall, acknowledging for the first time that its existing plan to fill the gap may be inadequate. CoCo bonds, which convert into equity if banks hit trouble, have so far been used sparingly as they are viewed as costly to sell for weaker lenders struggling to meet tougher capital requirements set by the European Banking Authority last year.

RBS Hybrid Bonds May Be Upgraded After Coupon Payments, S&P Says

Royal Bank of Scotland Group Plc’s hybrid bonds may be upgraded by Standard & Poor’s when the state-owned lender pays its first coupons on the notes since the European Commission lifted a ban on the payments.

Got TruPS?

An acronym for Trust Preferred Securities, TruPS are something of a hybrid between bonds and preferred stocks. TruPS are generally long-term, they make periodic interest payments and they mature at face value. And although TruPS can be issued by any company – they’re often issued by banks because banks benefit from their accounting treatment – TruPS can be included as Tier 1 capital.

The Implementation of the New Non-Viability Contingent Capital Requirements of the Basel III Rules

Spain May Need to Inject $6.4 Billion in Bankia, Expansion Says

Spain Tells Banks To Raise Capital, Fence Off Toxic Assets

A few days after having to bail-out BFA-Bankia, the Spanish government announced a set of measures to beef up their financial sector which will force banks to set aside €30 billion ($38.8 billion) to cover for possible losses on their loan portfolios.  Those institutions that can’t raise the capital on their own will have to issue contingent convertible bonds (CoCos) to the government at a 10% rate.

Spain Stakes Credibility on Fourth Bank Cleanup in 3 Years

CRD IV: Majority of states back compromise, UK still holding out

After more than 15 hours of negotiations at the Ecofin Council, on 2 May, a qualified majority of member states seemed willing to back a fourth compromise text drafted by the Danish Presidency on the reform of rules on capital requirements for banks, known as CRD IV (1). The vote will not take place until the next Ecofin Council, however, on 15 May, after “technical checks of the outstanding points,” said Danish Finance Minister Margrethe Vestager, on behalf of the EU Council Presidency. Meantime, it is hoped that the United Kingdom will sign up to the compromise.

Arguing about CRDIV