The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Barclays’ tier-one invention takes to the air

Issuer: Barclays BankAmount: e850 millionType of issue: tier-one Reserve Capital InstrumentsLaunched: April 12Book runner: Barclays Capital

In a quiet corner of the capital markets, a furious race has been taking place for the past two years. Teams of well-paid financial engineers have been striving to build the perfect tax-deductible tier-one capital security for European banks. Accusations of intellectual theft and skulduggery are quick to fly. And it's little wonder. A standardized, easy-to-use tier-one structure would be irresistible to bank treasurers looking to trim their cost of capital. The firm that makes a name for arranging these deals would be in line for a string of juicy mandates.

Most of the creations brought to market so far have been unwieldy. Tax-deductible tier-one capital has to look like equity as far as bank regulators are concerned but be sufficiently debt-like for interest payments to be tax-deductible. That usually requires a special-purpose vehicle incorporated in a tax haven. (For German banks, which have an exemption from the Basel rules, things are rather simpler, but that's another story.) In a typical tier-one deal the SPV issues preference shares and lends the proceeds to the parent bank.

The resulting creation flies, but only just. And that is why only a handful of European banks have issued hybrid tier-one securities since 1998, when new Basel guidelines opened the way for their use in all BIS countries.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree