Newsletter September 2011: Canada sets principles for contingent capital

OTTAWA – Canadian regulators became the first, in mid-August, to issue detailed guidance on how the new generation of hybrid instruments will operate in the light of the proposed Basel III capital and liquidity regime. Many of the existing hybrids, which combine equity and debt features, were revealed during the financial crisis to be less loss-absorbing than had been believed. These instruments will now be grandfathered, and phased out from regulatory capital.