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It will end in tiers
Regulators are intent on bolstering capital at financial institutions, with most citing common equity as the key component needed to absorb losses in financial downturns. What implications does this have for mutually owned institutions, and what can they do to improve their capital adequacy while satisfying regulators?
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Wherever children gather to play board games, the same squeal of outrage will inevitably be heard: “That’s not fair.” Soon, the floor will be littered with playing pieces and someone will have stomped away, red-faced and crying. UK building societies, German co-operative lenders and other mutually owned institutions are now similarly aggrieved – but there’s no hiding under the stairs for them.
Regulators want all financial institutions to hold more, and better-quality, capital. The gold standard
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