Hybrids in the news

BoE barking up the wrong tree

The Bank of England Financial Policy Committee's call for UK financial institutions to take advantage of the improvement in market conditions to raise outside capital is the right one. Sadly, it will likely remain unanswered, and for once, the banks won't be the guilty parties. The committee notes in its report that recent improvements in market conditions should help banks raise capital externally, and suggests that banks should look at options such as debt conversion or the issuance of suitable contingent capital instruments, as well as conventional equity. That all sounds great on paper, but there's a catch. Banks would love to look at debt conversion or issuing "suitable contingent capital instruments", but they simply can't, because the Financial Services Authority continues to drag its feet.

Bail-in fears trigger Tier 2 stampede

European banks, tired of waiting for regulatory certainty on bank capital instruments and seeking to protect their senior bondholders from soon-to-be-implemented resolution regimes, raised about €3.6bn-equivalent of Tier 2 debt last week in what was the busiest week for the asset class in years.

Banks could issue more sub debt to cut bail-in risk, says BoI capital head

The dawn of systemically important commodity traders

Commodity traders have increasingly been funding themselves directly through the capital markets, they have been making greater use of innovative financing tools. Some have used hybrid or convertible structures, and (particularly in Asia) have been making broader use of collateralized financing.

Karas: “No agreement possible without limitation of bonuses”

FROB and (bail-in) gristle