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Asian banks mull early calls on bank capital bonds 

March 3, 2014
The Economic Times

DBS Bank will become the first Asian lender to exercise a regulatory call option on a Basel II capital instrument on March 21, sparking investor concerns that other Asian banks may follow its lead.

Similar call options, which allow the issuer to redeem the bond at par if regulatory changes mean it no longer counts as capital, are featured in a number of outstanding bank capital bonds across Asia, including Singapore, Malaysia, Hong Kong and India.

In many cases, the bonds are years away from redemption and trade above par. Hence, if these banks decide to exercise regulatory calls, investors stand to lose out.

In the case of DBS, the bank offered Tier 1 notes which feature loss-absorption clauses at the same 4.7% coupon of its outstanding S$1.7bn Basel II perpetuals, which did not include the option to write down the value of the bond in case the bank is considered not viable.

Read more: The Economic Times

 
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