Basel III and beyond: The trillion dollar question
Can bail-in capital bail out the banking industry?
Bail-in capital is central to the regulatory reform of banks, and can help to restore confidence in the industry. The Basel Committee on Banking Supervision has announced that all non-core equity capital instruments would have to have a bail-in feature from January 1, 2013.
Regulators and banks now have just one year to make this complex regulation workable, and banks that do it well will have greater competitive advantage over other institutions.
The regulatory environment for banks is undoubtedly complex. This PwC publication examines the challenges and practical issues that need to be addressed before bail-in capital can become a reality.
- Defining bail-in capital
- The rationale and the problem of the bail-in debt proposals
- Where are we now?
- The size of the capital problem
- Debt-holder risk management – avoiding the death spiral
- Systemic considerations – protecting against contagion
- Legal issues – treating investors fairly
- Accounting issues – how will bail-in debt be valued?
- Tax – should bail-in debt be treated as debt or equity?
- Pricing – what price will make bail-in debt attractive to investors?
- A look to the future