Banks weigh up options, Europe closes in on loss absorption

04 Jan 2013

As European policymakers approach a final agreement on new rules specifying how subordinated bonds and additional tier one instruments must be structured, banks have two options: wait for clarity on how to incorporate loss absorption at point of non-viability, or simply press ahead with tier two issuance — and risk not receiving capital treatment under the new framework.

The next three-way discussions between the European parliament, commission and council on the fourth capital requirements directive (CRD IV) and the first capital requirements regulation (CRR) are scheduled for January 15. That date coincides with the European parliament’s plenary week, meaning that even if the rules were agreed ...

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