Analisis Comparativo Benchmarking
Páginas: 17 (4097 palabras)
Publicado: 22 de agosto de 2011
Thomas Wacker, CFA, analyst, thomas.wacker@ubs.com, UBS AG
Wealth Management Research
28 October 2010
■ Contingent convertible bonds (CoCos) are a new form of bank capital
security.
■ We explain the regulatory changes for subordinated bonds and discuss
Related research ■ "Swiss quality" - new capital requirements, 14 October
■ Subordinated Bank bonds shine in light of Baselpotential new structures and their risk profiles.
■ Ahead of the first CoCo bond issues, we provide insight into valuation
3, 16 September
■ Basel 3 - regulation in motion, 10 August ■ Subordinated Bank bonds regain appeal, 3
assumptions and investment considerations.
August
■ Banks review and outlook, 6 July
The upcoming Basel 3 regulations will not accept existing hybrid instrumentsas part of banks' regulatory capital. Final requirements will not be published until late November or early December, but existing proposals provide a preview of potential new capital instruments, their structures and their appeal for sophisticated investors willing to assume equity-like risks. The Swiss regulator FINMA was the first to propose the requirement now commonly known as the "Swissfinish" - that its largest banks use contingent convertible bonds to build a capital buffer on top of the Basel 3 minimum requirements. The Swiss commission proposed two conversion trigger levels, based on the common equity ratio defined under Basel 3. High-trigger CoCos would be converted if the common equity ratio declines below 7%, and low-trigger ones at 5%. This definition provides a preliminarylook at possible structures, and we think other regulators might adapt this model, or at least apply similar trigger levels. Our series on subordinated bank bonds covered the phaseout of existing Tier 1 and Tier 2 securities. Please refer to the 16 September 2010 edition for a detailed review.
Fig. 1: New bank capital structure based on BIS proposal of 19 August 2010
Source: BIS, UBS WMRThis report has been prepared by UBS AG.
Please see important disclaimers and disclosures that begin on page 6.
Past performance is no indication of future performance. The market prices provided are closing prices on the respective principal stock exchange. This applies to all performance charts and tables in this publication.
UBS Wealth Management Research
28 October 2010Stricter capital requirements for banks The Bank for International Settlements (BIS) suggested that all non-common Tier 1 and Tier 2 instruments contain write-off conditions linked to specific trigger events, in its August paper "Proposal to ensure the loss absorbency of regulatory capital at the point of non-viability." This enforced loss-absorption makes the risk of loss much higher compared toexisting Tier 1 and Tier 2 securities. At the same time, introducing these new capital instruments makes existing subordinated bonds relatively less risky, as there would be a larger capital buffer available to protect them against losses (see Fig. 2). CoCos qualifying as non-common Tier 1 capital would be subordinated to deposits, senior and other subordinated claims of the bank. However, this form ofsubordination primarily matters in liquidation, and hence has little relevance for CoCos, in our view. By the time a bank has been deemed nonviable and goes into liquidation, all attempts to recapitalize and restructure it have failed. As a consequence, CoCos would have already triggered conversion in most cases and would no longer exist. Losses cannot be recovered Basel 3 requires a permanentwrite-off on the principal value of future Tier 1 and Tier 2 bonds in order to avoid a public sector capital injection bailing out capital instrument holders, as has been the case during the financial crisis. These write-offs are to be achieved by immediately compensating bondholders in the form of new common stock, or an equivalent for nonjoint-stock companies. This must occur prior to any public...
Wealth Management Research
28 October 2010
■ Contingent convertible bonds (CoCos) are a new form of bank capital
security.
■ We explain the regulatory changes for subordinated bonds and discuss
Related research ■ "Swiss quality" - new capital requirements, 14 October
■ Subordinated Bank bonds shine in light of Baselpotential new structures and their risk profiles.
■ Ahead of the first CoCo bond issues, we provide insight into valuation
3, 16 September
■ Basel 3 - regulation in motion, 10 August ■ Subordinated Bank bonds regain appeal, 3
assumptions and investment considerations.
August
■ Banks review and outlook, 6 July
The upcoming Basel 3 regulations will not accept existing hybrid instrumentsas part of banks' regulatory capital. Final requirements will not be published until late November or early December, but existing proposals provide a preview of potential new capital instruments, their structures and their appeal for sophisticated investors willing to assume equity-like risks. The Swiss regulator FINMA was the first to propose the requirement now commonly known as the "Swissfinish" - that its largest banks use contingent convertible bonds to build a capital buffer on top of the Basel 3 minimum requirements. The Swiss commission proposed two conversion trigger levels, based on the common equity ratio defined under Basel 3. High-trigger CoCos would be converted if the common equity ratio declines below 7%, and low-trigger ones at 5%. This definition provides a preliminarylook at possible structures, and we think other regulators might adapt this model, or at least apply similar trigger levels. Our series on subordinated bank bonds covered the phaseout of existing Tier 1 and Tier 2 securities. Please refer to the 16 September 2010 edition for a detailed review.
Fig. 1: New bank capital structure based on BIS proposal of 19 August 2010
Source: BIS, UBS WMRThis report has been prepared by UBS AG.
Please see important disclaimers and disclosures that begin on page 6.
Past performance is no indication of future performance. The market prices provided are closing prices on the respective principal stock exchange. This applies to all performance charts and tables in this publication.
UBS Wealth Management Research
28 October 2010Stricter capital requirements for banks The Bank for International Settlements (BIS) suggested that all non-common Tier 1 and Tier 2 instruments contain write-off conditions linked to specific trigger events, in its August paper "Proposal to ensure the loss absorbency of regulatory capital at the point of non-viability." This enforced loss-absorption makes the risk of loss much higher compared toexisting Tier 1 and Tier 2 securities. At the same time, introducing these new capital instruments makes existing subordinated bonds relatively less risky, as there would be a larger capital buffer available to protect them against losses (see Fig. 2). CoCos qualifying as non-common Tier 1 capital would be subordinated to deposits, senior and other subordinated claims of the bank. However, this form ofsubordination primarily matters in liquidation, and hence has little relevance for CoCos, in our view. By the time a bank has been deemed nonviable and goes into liquidation, all attempts to recapitalize and restructure it have failed. As a consequence, CoCos would have already triggered conversion in most cases and would no longer exist. Losses cannot be recovered Basel 3 requires a permanentwrite-off on the principal value of future Tier 1 and Tier 2 bonds in order to avoid a public sector capital injection bailing out capital instrument holders, as has been the case during the financial crisis. These write-offs are to be achieved by immediately compensating bondholders in the form of new common stock, or an equivalent for nonjoint-stock companies. This must occur prior to any public...
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