Investors wary of contingent capital

The Basel Committee is preparing to finalise its guidelines on gone-concern contingent capital, while discussions continue on going-concern contingent capital and bail-ins. But everything depends on investor appetite for this paper – and that is far from certain. By Michael Watt

 

When the Basel Committee on Banking Supervision publishes the final version of its Basel III package this month, many senior bankers will be flicking past the meaty sections on credit value adjustment capital calculation, liquidity and counter-cyclicality, and going straight to the anticipated guidance on contingent capital.

Banks know they will have to raise more capital – common equity is set to climb from 2% to 4.5%, with an additional 2.5% capital conservation buffer on top. Less clear is