Opinion
Trading regulatory risk in the $40b hybrid sector
Investors are puzzling over what to do with their hybrids following APRA’s proposal to phase out the sector.
Christopher JoyeColumnistThe most common question this column has fielded lately is how to play the regulator’s globally unprecedented proposal to replace $40 billion of bank hybrids with debt, boosting leverage with the quid pro quo of higher returns for shareholders given the lower cost of capital.
Shareholders and the regulator, which is slashing its compliance burden by not having to oversee the hybrid market, clearly win. Creditors, depositors and taxpayers all lose because banks become intrinsically riskier.
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