Perpetual subordinated debt : The issues

Course objectives

  • Understanding perpetual subordinated debt instruments

  • A fast growing market : Why ?

  • Understanding Bank Capital adequacy ratios affecting supersubordinated debt issuances.

Course content

Introduction

  • Définitions : Super-subordinated debt, Contingent convertible bonds, Additional Tier1, perpetual bonds,….
  • Which differences with subordinated debt ?
  • Legal source of those instruments : la loi de solidité financière (aug 2003)
  • Introduction to accounting issues (IAS 32)

1. Basel 2 ans 3 : Key issue to understand perpetual subordinated debt

  • Basel 2 definitions (Tier1, core Tiers1, Tiers2)
  • Supersubordinated debt in banks capital
  • Regulation and its conséquences
  • Basel 3 and Common Equity Tiers One (CET1)

Case Study:How to calculate Banks solvency Ratios ?

2. A very usefull product for both issuers and investors

  • Advantages for issuers : avoiding capital dilution issues and collecting « quasi-equities »

Case Study: How did Credit Agricole SA use those instruments during 2008 financial collapse ?

Case Study: Calculating ratios

  • Advantages for Investors : An answer to the lack of yield among other asset classes
  • Inconvenients for Investors : Risk in case of banks resolution

3. Specific caracteristics :

  • Accounting aspects : IAS 32
  • An optional Yield
  • « Perpetual » debt
  • Banks failures issues
  • The triggers and conversion rates

Case Study: SG issue in 2013, Deutsche Bank Issue in April 2014




Alain Bouijoux

Alain Bouijoux

Head of sales in London and Paris on a desk for foreign exchange and interest rate derivatives, Alain has evolved for over 10 years in the markets. He faced the needs of his clients as well as the requirements of traders and management obligations of back and middle offices. Today he puts that experience at your disposal to answer all your questions about markets and their actors.

Alain Bouijoux also teaches :



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