Canada Leads The Way On Hybrids While Europe Waits

Further clarity emerged this week as to what regulators will require from banks to make bank capital instruments compliant under Basel 3 when Canada released its rules on non-viability contingent capital, Reuters reported. However, while the release provided clues on how regulators will define non-viability, the implications for Europe are not obvious while current market conditions would make any issuance extremely difficult, if not impossible. "Canada is first out of the blocks on providing guidance to its institutions on how to incorporate non-viability within Tier 1 and Tier 2 instruments," said Sean Richardson co-head of hybrid structuring at JP Morgan. "While there is not necessarily a direct read-through to Europe, everyone will look at OSFI's approach - it's certainly a key data point." The Office of the Superintendent of Financial Institutions Canada (OSFI) released its guidelines this week and the Australian regulator is expected to follow soon with its rules. The OSFI release follows a consultation process that started at the beginning of the year. Read more. (Subscription required.)