Roll on schreef op 15 augustus 2016 19:31:
Banks’ CoCo Bond Payouts Gain More Protection in EU Proposal
August 15, 2016 — 10:47 AM CESTUpdated on August 15, 2016 — 4:32 PM CEST
The European Union is considering adding to protections for banks’ riskiest debt securities by requiring lenders to pay coupons before stock dividends and staff bonuses.
Coupons on additional Tier 1 securities, such as contingent convertibles, or CoCos, “should be given priority” if capital levels are breached that trigger limits on payouts, according to an undated European Commission discussion paper prepared for a meeting of national experts. Banks would only be able to pay stock dividends if such coupons are paid in full, according to the proposed rules from the EU’s executive body.
Regulators introduced CoCo bonds -- undated securities with optional interest payments that are gone forever if missed -- to replace forms of debt that didn’t absorb losses in the 2008 financial crisis. EU law currently forbids tying AT1 coupons to the payment or non-payment of dividends with so-called dividend pushers and stoppers.
“This could foreshadow a wider reversal of EU policy on dividend stoppers,” said Steven McEwan, a partner at Hogan Lovells International LLP in London. “It makes sense as a policy because it would allow a bank in distress to recapitalize by selling CoCos, which wouldn’t be possible if investors were afraid coupons would be turned off immediately so that dividends can be paid to ordinary shareholders.”
The CoCo proposal is part of a rule overhaul in which the commission is reining in supervisors’ powers to impose capital requirements exceeding the legal minimum and giving the banks more leeway to set those capital levels themselves. That move to curb so-called Pillar 2 requirements, a crucial factor for payout limits, started with a March paper that also raised the option of protecting CoCo coupons.
www.bloomberg.com/news/articles/2016-...