Danish FSA Aids Bank, Experimental Hybrid Debt Unleashed

June 3
7:07 AM 2013

To be able to build faster regulatory benefits, banks in Denmark will be allowed instruments for hybrid debts. This is because banks are facing firmer requirements for individual capital as stated by the country's financial watchdog.

This would mean that the lenders in Scandinavia will be free to utilize bonds after being hit the hardest by the current global crisis. They will be given freedom to absorb losses before it can reach default and convert equity at a given trigger. This was stated in an interview to the director general of the Financial Supervisory Authority, Ulrik Noedgaard.

The decision from FSA ended speculations that Danish banks are to use equity only to fulfill lender-specific requirements. On the other hand, banks argued that the pressure they carry to build reserves is threatening as restrictions on lending capital costs increases. It was on March that these financial institutions learned that they have to put on hold a 5% extra capital points while lawmakers are still debating on said legislation.

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