Capital changes

Financial supervisors have reaffirmed the importance of common equity and disclosed reserves in Tier I capital. But the direction of discussions on hybrids in Tier I and the relative importance of Tier II is causing concerns in Asia. Harry Thompson reports

Just over a decade ago, the Basel Committee on Banking Supervision issued the Sydney Press Release, which created the framework for the use of ‘innovative' hybrid assets as a basis for Tier I capital - the funds a bank needs to hold to ensure it can meet its responsibilities as a going concern. At the time, supervisors were concerned that major financial institutions would place too much reliance on what were then new debt/equity hybrid Tier I capital structures, which often included step-ups -