ICMA survey on buffer contingent capital securities (BCCS)

17 January 2012

EBA published a formal recommendation on the creation of temporary capital buffers which may include very strong newly-issued buffer convertible capital securities ("BCCS"), if consistent with the EBA "Buffer Convertible Capital Securities Common Term Sheet".

On 8 December 2011, the European Banking Authority (EBA) published a formal recommendation on the creation of temporary capital buffers, the objective of which is to create an exceptional and temporary capital buffer to address current market concerns over sovereign risk (the “Stress Capital Requirement”), and which may include very strong newly-issued buffer convertible capital securities (“BCCS”) if consistent with the EBA “Buffer Convertible Capital Securities Common Term Sheet”.

One of the key advantages of issuing BCCS to meet the temporary Stress Capital Requirement is that it gives issuers access to the fixed income investor base to raise EBA Core Tier 1 eligible capital, and therefore the possibility of using BCCS to tap supplementary investor sources for Core Tier 1 capital is welcomed.

ICMA asked among major market participants a series of questions comparing the market impact of BCCS with a Tier 2 host with otherwise identical BCCS with an Additional Tier 1-style host.

Related links:

• ICMA's letter to the EBA: Proposals relating to the EBA Termsheet for Buffer Convertible Capital Securities
• the results of ICMA's survey on “Buffer Contingent Capital Securities”

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