Basel Committee to look at tier 1 capital quality

The Basel Committee on Banking Supervision is preparing radical changes to its rules on capital quality, including a 'soft target' of 75% for equity capital - up from 50% - and the possible abolition of two-tier capital, according to a senior regulator.

As things stand, 50% of tier 1 capital is supposed to qualify as 'core' equity, which is permanent, absorbs losses and gives the issuer freedom on whether to pay dividends. The rest can comprise various types of hybrid instruments, which are

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