Troubled bank to clarify India’s Basel III commitment

Author: Ashley Lee | Published: 24 Feb 2014
RBI faces a difficult decision in how to deal with the United Bank of India
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.

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...