DUTCH lender Rabobank is marketing a new hybrid bond to fit incoming global banking regulations.
The bank is planning a deal where investors in its new hybrid bond could lose all their money if its regulatory capital ratio requirements fall below a present threshold, after the Basel Committee on Banking Supervision called for mechanisms to force investors to incur losses to maintain the stability of banks.
Regulators believe existing hybrid bonds failed to absorb losses during the financial crisis.
The perpetual notes lose money only if Rabobank’s core Tier 1 consolidated equity capital ratio falls below eight per cent.
The Utrecht-based lender is the only private sector bank to hold a top triple A rating from Moody’s and Standard & Poor’s and had a Tier 1 ratio of 13.5 per cent in June last year.
For investors to lose money on the new hybrid bonds the bank would need to lose €12.3bn (£10.3bn).
Rabobank head of long term funding Michael Gower said:
“The issue is very significant for the market as a whole. People are waiting anxiously to see how this goes and it could segue into a huge amount of issuance by other banks.”