LONDON, Nov 22 (IFR) - European banking union talks should
not necessarily delay the implementation of CRD4, a top UK
government policy maker said at IFR's 2012 bank capital
conference, adding that there was a strong political incentive
to get the new regulations finalised.
"There is a drive to get the CRD4 agreed. The CRD4 and
banking union are linked, but this does not change the need to
get CRD4 up and running. Both are moving along," said Ian
Searle, policy advisor of capital issues at HM Treasury on
Although negotiations on CRD4 had been slow to start, they
had picked up, Searle added.
"There is a strong political incentive to get it done,
especially against the backdrop of the banking union," he said,
although there are still some sticking points, which include the
European parliament's recommendations on remuneration.
Experts speaking on the panel agreed that issuers were
starting to get more comfortable with the new framework, but
stressed the need for more clarity.
"We're very close to getting all the issues resolved,
particularly around the ability to structure new capital.
Although there are some areas that need to be finalised, and are
a bit rough around edges, our clients are starting to get
comfortable," said AJ Davidson, head of hybrid capital at RBS.
He said Tier 2 instruments were the most stable in terms of
there being less uncertainty around structuring and features the
instruments should have.
"We are starting to get to grip with a new reality,"
The main problem surrounding Tier 1 securities concerns the
diverse framework in terms of corporate law across Europe, which
could make it difficult to establish a level playing field among
banks in different countries.
Aside from regulation and a banking union, other important
parameters include tax rules and supervision.
"Having one supervisor is important," said Khalid Krim, head
of capital structuring EMEA at Morgan Stanley.
The panel also played down differences in the speed at which
different countries were moving on Basel 3, commenting on a
perception in the market that the U.S. could be slipping towards
"The U.S. delays do not mean they are moving away from it.
The U.S. text is very good. It's short and clear, and offers
less room for interpretation than other texts globally," said
Gerald Podobnik, head of capital solutions at Deutsche Bank.
"What we are seeing, though, is that emerging markets
nations are really well advanced, while the two big players that
used to drive this are late."
Davidson agreed that the Dodd Frank framework was clear, and
that banks could issue preference shares for Tier 1 even if
Basel 3 is not implemented in 2013.
Although the resolution directive still needs to be
implemented in Europe, bankers stressed the need to get the
The topic of grandfathering also stoked debate, particularly
surrounding a lack of clarity on the issue, which panelists said
was one of the major reasons for the lack of issuance in the
first half of the year.
"Banks are including stop-gap measures in Tier 2 because
they are not getting clarity from regulators," said Davidson.
"The biggest issue around this is not when the cut-off date
is, as we expect that to be year-end, and is the reason why
people are structuring deals on that basis. The broader debate
is what happens on Jan 1. Will a bank have to include opt-in
arrangements, or will they include contractual obligations?"