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Rabobank has taken contingent capital in a bold new direction, eschewing conversion into equity-like instruments for an automatic writedown. But without any regulatory benefit, it is not entirely clear what's in it for the Dutch bank.
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A judgement from a French court of appeals upholding creditors’ rights could be just what is needed to bring securitisation issuers from the country out of the wilderness.
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The Basel Committee has started to publicly worry about a backlash from the industry over its bank capital reforms. It’s a legitimate concern but leaving the hybrid capital market in limbo is not the way for it to win friends.
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UK mortgage lenders and rating agencies have woken up to the threat of £319bn of state-supported borrowing that will need refinancing in the three years from 2011. But pleas for further state aid will likely go unheeded: the securitisation industry has already had two years to put its house in order while the government has its own fiscal problems to worry about.
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Bank of America Merrill Lynch’s star bankers say the firm could be about to renege on pay deals put in place last year to retain staff. The bank appears to have settled on a solution already used by Citi and Royal Bank of Scotland to pay some of its bonuses, writes David Rothnie.
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Hybrid tier one issuance has yet to make an appearance this year — and, thanks to the Basel Committee, it is unlikely to for months. But not only do banks have to worry about future-proofing new deals, they also have to work out what to do with $22bn of bonds callable in 2010.
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After the blizzard of new banking regulations proposed in 2009, we might soon have an idea of how much these initiatives will cost, and what the industry will look like when regulators have finished with it. Initial estimates show some surprising results.
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Investors swarmed over the first public Dutch RMBS since the start of the credit crisis, opening up another jurisdiction for securitisation. But the haste with which Arena 2009-1 was marketed raises questions about how thoroughly investors are examining new deals.
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Banks will soon have to build up buffers of capital during economic booms even though regulators are still lacking a plan on how the rules should be applied. Some recent proposals would make central banks micromanagers of the economy, a job for which they are ill-equipped.
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Contingent core capital is proving attractive to issuers because it’s the cheapest option to keep regulators happy, and attractive to investors because of its nevertheless healthy yield. But it won’t make the banks, or the system, any safer. Only a wholesale restructuring of the industry will do that.