Fund managers expect the Basel Committee's new rules on bank capital adequacy to have a major impact on financial sector debt and equity markets.
Financials comprise more than 40% of the UK corporate bond indices, with bank debt broken down into various levels. This debt comprises 12% senior, 12.5% lower Tier 2, 1.9% upper Tier 2, and 5% Tier 1, and combined they make up the highest yielding component of the indices. On Sunday, banking regulators voted to increase the minimum level of core Tier 1 capital to 7%, up from the current 2%. The new rules will come into force from January 2013, and will be fully implemented by 2019. But Cazenove's head of credit Peter Harvey says the minimum Tier 1 capital requirement should have...
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