Basel sets capital rules for debt securities

Debt securities of banks must be capable of being written off or converted into common stock in a crisis if they were to count towards a lender’s capital, global regulators said.

National regulators should ensure such securities took losses to support a lender on the brink of failure before public money was used, the Basel Committee on Banking Supervision said in a statement on its website.

“All classes of capital instruments” must “fully absorb losses at the point of non-viability before taxpayers were exposed to loss,” the committee said.

Regulators are aiming to avoid a repeat of the financial turmoil that followed the 2008 failure of Lehman Brothers Holdings and resulted in European governments alone setting aside more than $5 trillion of public money to save their banks.