Basel III implementation Basel III implementation is 80% harmonised across Europe. This will greatly improve in four years time, once the Banking Union is fully implemented; Investor appetite, rather than tax or legal regimes, will determine which jurisdictions issue the most bank capital this year; European Additional Tier 1 (AT1) issuance is tipped to reach EUR 30 billion ($41.2 billion) this year. Investors' shift in focus from capital ratios to also include leverage ratios will encourage this dealflow. The outcome of the European Central Bank's asset quality reviews is not likely to be important; AT1's core investor base has migrated from Asian private banks to institutional investors - particularly London-based multi-strategy hedge funds; Equity-linked loss-absorption mechanisms give issuers greater scope to tailor AT1 deals as compared to non-dilutive mechanisms; Banks are not intending to innovate for the sake of innovating. Capital instruments should be consistent and comparable, so they can be quickly understood (and if necessary converted) in times of stress.
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