MORE TLAC PRICED, MORE TO COME!

It's been a busy couple of weeks on the bank capital note front, with TLAC issuance getting a decent reception by investors, following a dire January when the sharp sell-off occurred on subs and the related concern that coupon payments might not be paid on AT1 debt and the impact of lower interest rates on bank NIMs. According to Reuters, HSBC recently issued into the US market some $7 billion of TLAC paper, making a dent in the issuance pipeline by lenders which may total over $100 billion before it is all said and done. TLAC debt is essentially a layer of capital issued by banks which can be written down if a bank is under severe stress or fails certain triggers, essentially adding to the capital base and reducing systemic rents. 

BNP Paribas also issued in the space according to the IFR last month with a T2 paper. This issue was priced at LIBOR + 240bps or a 25bp concession according the IFR this month. The IFR (March 5th, 2016) also is reporting that the market place has identified many gaps in the current treatment of this kind of issuance by the EBA and the EC. The IFR identifies confusion about regulatory powers and the individual jurisdictional oversight over the issuance rules and coupon holidays. Banks are complex businesses with complex accounting policy, there is certainly scope for flexibility in the roles while balancing the needs for standardisation. Interestingly, Keith Mullin of the IFR has penned recently that he reckons standardisation is not an aim of the industry, in fact, it may prefer to maintain the differences and nuances that exist as a means to profit from issuance and secondary trading opportunities. So a gap apparently exists between the industry and the regulator on standardisation of European FI debt issuance. See this link for more information:http://www.reuters.com/article/usa-corpbonds-banks-idUSL2N16B1UV.