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[FONT=&quot][Reuters] Tier 1 debt under pressure after Basel decision [/FONT]
[FONT=&quot][BARC.L CRDUB.UL] By Andrew Perrin and Adam Parry
LONDON, Jun 27 (IFR) - LONDON, June 27 (IFR) - Tier 1
financial paper is suffering this morning with names such as
UniCredit around 40bp wider to swaps at 690bp in the five-year
sector, while Barclays 4.875% December 2014 23bp wider at
MS+830bp.
One banker noted that in Senior CDS Italian banks
are 10bp-15bp wider, and Subordinated 15bp- 20bp wider, clearly
underperforming the indices where the Senior Financial index is
currently 3bp wider on the day at 179bp, while the Subordinated
Financial index is 6bp wider at 311bp.
Part of that move maybe a follow on from the sell-off on
Friday following the Italian bank share suspension, but the big
news for the sector over the weekend has come from the Basel III
committee agreeing on the quantity and quality of the capital
surcharge for global systemically important banks (GSIB's).
A compromise has emerged ahead of a consultative paper due
at the end of July that means that a penalty charge of between
1% and 2.5% over and above the minimum core Tier 1 ratio
requirement of 7% will be needed based on an institutions
systemic importance. The surcharges will be introduced between
2016 and 2019.
That would see the major banks such as Barclays qualifying
for a top 2.5% surcharge, while names such as UniCredit would be
levied with a surcharge of 1.5%.
According to analysts at ING, "one important element is that
no part of the basic Basel 3 surcharge can be met with
contingent capital (CoCo) instruments although if banks are
required under local regulations to further augment their
capital profiles above minimum CET1 and surcharge requirements
with hybrid instruments they may have liberty to use CoCos."[/FONT]
 
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