|
 Download the complete text in PDF format.
On October 21, 1996, a ruling by the Federal Reserve pruned some thorns from the prickly issue
of defining banks' core capital. As a result, bank holding companies (BHCs) were presented with a costeffective
way to raise regulatory capital in the form of a debt-equity hybrid called trust-preferred
securities (TPS).1 These instruments, issued by a special-purpose financing vehicle established as a trust
subsidiary of a BHC, are attractive because they generate both tax-deductible interest payments and
qualify as Tier-1 (core) regulatory capital, following an October 21, 1996 ruling by the Federal Reserve.2
Although TPS and other similar hybrids have existed since late 1993, after the Fed's ruling BHCs issued,
through 1999, $31 billion of these securities across 162 filings for an average issue size of $188 million
(Table 1). Prior to this ruling, no BHC had announced a TPS filing.
Download the complete text in PDF format.
|
PDF documents on this page require Adobe Acrobat PDF Reader.