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Asia-PacificMay 1 2005

Asia hails arrival of the hybrids

As new frameworks such as Basel II are implemented by Asia’s regulators, the region’s banks will have to adopt innovative new ways of raising debt and capital.Brian Caplen explains.In the grim days following the Asian financial crisis, efficient capital management was not a concept much in vogue with the region’s banks.Staying alive in any shape or form was the focus, not fussing about different forms of capital. But now the onward march of regulation in Asia and new demands from shareholders are concentrating the minds of bank management.
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Hybrid capital, which is still virtually unknown in some markets such as Malaysia and the Philippines, is likely to take on a more dominant role as banks respond to pressures to be more efficient. Hybrid capital allows banks to raise capital that is treated as equity by the regulators but is non dilutive and allows investors to receive interest payments free from withholding tax as if it were bonds.

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