Aug 5, 2018
Investors in dispute with HSBC over legacy capital instruments
HSBC has become the latest big bank to push back against investors in a dispute over legacy capital instruments that have raised questions over whether they should still count towards lenders' regulatory requirements. The battle underlines how banks are fighting to keep legacy capital instruments that provide them with cheap or convenient access to funding at a time when regulators have promised to clean up lenders' capital structures to make rescues easier to arrange in a crisis. Investors in the Discos had expected the bank to buy them back at par after they were deemed to be "Ineligible" to count towards its capital buffers under the EU's 2014 capital requirements regulation. HSBC said the securities would be reclassified as "Fully eligible tier 2 instruments" - a type of supplementary capital for banks that can be bailed in during a crisis. The contest over HSBC's Discos follows a related skirmish between Italian bank UniCredit and UK hedge fund Caius Capital over €3bn of securities known as Cashes.
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