A consultative document on the loss absorption of capital instruments. It proposes that subordinated debt provide a capital buffer at an earlier stage to prevent the need for government capital injections. The idea is to end the notion of 'too big to fail', level the playing field between big and small banks, and reduce moral hazard, under which bondholders rely on government support to avoid losses.
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Reg rageSeptember 28 2010
Sharing the pain
A Basel proposal for subordinated debt to absorb losses if a bank is about to fail could overturn risk profiles, raise the cost of capital for banks and curtail issuance of subordinated instruments. Writer Geraldine Lambe
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