Basel III expected to prompt tier 2 decline

Author: | Published: 23 Apr 2013

KEY TAKEAWAYS

· A reduction in tier 2 issuances as banks work to meet Basel III’s capital quality requirements;

· Given the instrument’s treatment under the rules, banks are now more focused on building up tier 1 reserves and selling off tier 2;

· A decline in contingent convertible bond issues has also been predicted as those banks with a funding gap are unlikely to issue a product that brings investors to equity.

Lawyers in Europe have predicted a decline in tier 2 issuances as banks work to meet Basel III’s capital quality requirements.

Under Basel III, bank will be required to triple core tier 1 capital ratios from two percent to seven percent by 2019. In addition to the minimum capital requirements, Basel III introduces a capital...