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Capital Markets Law Journal Advance Access originally published online on August 27, 2008
Capital Markets Law Journal 2008 3(4):458-468; doi:10.1093/cmlj/kmn025
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© The Author (2008). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Tier one hybrids for credit institutions—is convergence in regulation possible?

Simon Sinclair and Michele Crisostomo*
* Clifford Chance.

The first 150 words of the full text of this article appear below.


Key points

  • Hybrid instruments are financial instruments issued by banks which combine debt and equity features (eg subordination, loss absorption, deferral or cancellation of interest, perpetual nature). Hybrid instruments have been and are increasingly being used by credit institutions to increase regulatory capital.
  • In June 2005, the European Commission launched an initiative aimed at the adoption of a harmonized regulatory framework applicable to hybrid capital instruments. For these purposes, it involved the Committee of European Bank Supervisors who in December 2007 issued a draft proposal (the CEBS proposal) setting out the key features for a uniform definition of hybrid instruments. This was followed by the issue by the European Commission of a consultation paper on proposed changes to the Capital Requirements Directive (CRD) in April 2008.
  • This article considers the industry's reactions to the CEBS's proposal and the CRD draft and suggests that the objective to achieve true uniformity in . . . [Full Text of this Article]

 

   1. Background
 

   2. A brief overview of hybrid instruments
 

   3. The 2007 CEBS proposals in relation to hybrids
 
Permanence
Loss absorption
Payment flexibility

   4. Reaction to the CEBS proposals in the United Kingdom
 

   5. Reaction to the CEBS proposals in Italy
 

   6. Further CEBS proposals
 
Loss absorption

   7. Capital Requirements Directive
 

   8. Position in the United Kingdom
 

   9. Position in Italy
 

   10. Conclusions
 

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