Implikationen wären nicht zu unterschätzen.
Implications would not be underestimated.
Ist aber noch nicht fix.
Is still not fixed.
By Karen Brettell
By Karen Brettell
BASILEA II USA?
NEW YORK, May 20 (Reuters) - Trust preferred securities may
NEW YORK, May 20 (Reuters) - Trust preferred securities may
no longer count as Tier 1 capital for banks under new US
no longer count as Tier 1 capital for banks under new U.S.
rules, which may result in some banks needing to raise new
rules, which may result in some banks needing to raise new
capital, while the securities may also be made subject to
capital, while the securities may therefore be made subject to
buybacks or exchanges.
buybacks or exchanges.
The US Senate last week unanimously adopted a measure
The U.S. Senate last week unanimously adopted a measure
sponsored by Republican Senator Susan Collins that would
sponsored by Republican Senator Susan Collins that would
require large financial firms to set aside more capital to
require large financial firms to set aside more capital to
boost their stability during times of crisis.
boost their stability during times of crisis.
The amendment is now part of the Financial Reform Bill,
The amendment is now part of the Financial Reform Bill,
which is expected to be voted on this week.
which is expected to be voted on this week.
The measure requires that Tier 1 capital at bank holding
The measure requires that Tier 1 capital at bank holding
companies comprise only equity and not hybrid instruments such
companies comprise only equity and hybrid instruments such not
as trust preferreds.
as trust preferred.
Trust preferreds are equity-like
Trust Preferred are equity-like
securities that also make quarterly interest payments and
securities so that make quarterly interest payments and
qualify as debt for tax purposes.
qualify as debt for tax purposes.
The securities account for more than $125 billion in Tier 1
The securities account for more than $ 125 billion in Tier 1
bank capital, analysts at Barclays Capital said in a report.
report bank capital, analysts at Barclays Capital said in a.
"The loss of Tier 1 status of these securities, if the
"The loss of Tier 1 status of these securities, if the
proposal is enacted, may have material consequences for the
proposal is enacted, may have material consequences for the
capitalization ratios of several credits," they said.
capitalization ratios of several credits, "they said.
Capital One (COF.N) may be among the most affected banks,
Capital One (COF.N) may be among the most affected banks,
as it holds around 31 percent of its Tier One capital in trust
as it holds around 31 Percent of its tier one capital in trust
preferreds, Barclays said.
preferred, Barclays said.
A Capital One spokesperson was not immediately available
A Capital One spokesperson was not available immediately
to comment.
To comment.
Analysts at credit research firm CreditSights said Capital
Analysts at credit research firm CreditSights said Capital
One may need to raise as much as $1.75 billion in new capital
One may need to raise as much as $ 1.75 billion in new capital
if rules were implemented that both increase Tier 1 capital
if rules were implemented that increase both Tier 1 capital
requirements to 8 percent and exclude trust preferreds from the
requirements to 8 percent and exclude from the Trust Preferred
holdings.
holdings.
The bank, however, would not face any shortfall under the
The bank, however, would not face any shortfall under the
current 6 percent ratio, they said.
current 6 percent ratio, they said.
"We note that most all US banks have extremely robust
"We note that most all U.S. banks not have extremely robust
Tier 1 capital ratios at this time, and by our estimates all of
Tier 1 capital ratios at this time, and by our estimates of all
the banks in our universe would be able to maintain capital
the banks in our universe would be able to maintain capital
above the current 6 percent minimum Tier 1 ratio even if trust
above the current 6 percent minimum Tier 1 ratio even if trust
preferreds were excluded," they added.
preferred were excluded, "they added.
M&T Bank (MTB.N), however, may also potentially face a $592
M & T Bank (MTB.N), however, may therefore potentially face a $ 592
million shortfall if Tier 1 ratios are increased to 8 percent
million shortfall if Tier 1 ratios are increased to 8 percent
and trust preferreds are excluded, CreditSights said.
and Trust Preferred are excluded, CreditSights said.
An M&T spokesman said the bank does not comment on proposed
An M & T spokesman said the bank does not comment on proposed
legislation.
legislation.
Tier 1 capital is a measure of a bank's strength and is
Tier 1 capital is a measure of a bank's strength and is
based on aa ratio of core equity relative to assets.
based on aa ratio of core equity relative to assets.
Debt issuers may also be more likely to attempt to buy back
Debt issuers may therefore be more likely to attempt to buy back
the debt, or exchange it for other securities, as they become
the debt, or exchange it for other securities, as they become
less attractive from a capital standpoint, Barclays said.
less attractive from a capital standpoint, Barclays said.
This could be favorable for bonds that are currently
This could be favorable for bonds that are currently
trading below par, as issuers may seek to buy back debt with a
trading below par, as issuers may seek to buy back debt with a
low coupon at a premium or buy back high coupon debt at their
low coupon at a premium or buy back high-coupon debt at their
par value, the bank said.
par value, the bank said.
Issuers may also try to exchange the debt for more senior
Issuers may also try to exchange the debt for more senior
bonds with a lower interest expense or for junior bonds that
bonds with a lower interest expense or for junior bonds that
have better capital treatment, both of which would likely
have better capital treatment, both of which would likely
happen at a premium to current prices.
happen at a premium to current prices.
Bonds currently trading above their par value, by contrast,
Bonds currently trading above their par value, by contrast,
may potentially be bought back at their par value, causing a
may potentially be bought back at their par value, causing a
mark to market loss for the holder.
mark to market loss for the holder.
This is because most trust
This is because most trust
preferreds have an option for the issuer to buy back the debt
have preferred an option for the issuer to buy back the debt
at par in the case of a "capital treatment event," Barclays
at par in the case of a "capital treatment event," Barclays
said.
said.
(Editing by Dan Grebler)
(Editing by Dan Grebler)
