Korea Basel III change to boost deals

Author: Ashley Lee | Published: 14 Oct 2014

Clarifications of the write-down requirements for Korean banks’ Basel III-compliant bonds are expected to encourage deals and appeal to investors.

Korean regulators recently clarified that the terms and conditions of Basel III-compliant bonds from banks in the jurisdiction. Previously either a management improvement order (MIO) by the relevant regulators or regulator’s designation of the financial institution as insolvent would trigger a write-down.

But recent bond offerings have shown that bonds will only be written down when an institution is designated insolvent.

The Korean regulator has taken the position that bonds will be treated as Basel III-compliant additional tier 1 (AT1) and tier 2 bonds with tier 1 or tier...