State-owned United Bank of India (UBI) might hold the dubious
distinction of being Asia's first bank to see its capital
ratios fall below Basel III requirements.
|RBI faces a
difficult decision in how to deal with the United Bank of
But while regulators elsewhere have committed to allowing
weak banks to fail in an orderly fashion, the Indian government
might bail out the bank rather than bailing in bondholders. The
move could, however, cause the international community to
question the regulator's commitment to Basel III.
Saswata Guha, a director in Fitch Ratings' financial
institutions group, said there are limited options. Either the
government supports a bank that's in trouble and bails out
bondholders at different levels of the capital structure, or it
follows the Basel III regime and forces losses on holders of
hybrid Tier 1 and Upper Tier 2...