US banks 'looking to repay billions in debt securities'

18 June 2012

Major US banks are looking to pay back billions of dollars on high interest debt securities in the near future, it has emerged.

According to the Financial Times, financiers are hoping to take advantage of proposed new rules from the Federal Reserve (Fed) by retiring up to $120 billion in outstanding trust preferred securities.

These assets currently count towards companies' tier one capital ratios as banks are able to defer interest payments if necessary, but also include a standard clause that permits financiers to repay them early should their capital status be altered.

As such, financiers such as JP Morgan and Citigroup are now looking to invoke this ruling by recalling around $16 billion worth of these securities.

Jason Goldberg, US banks analyst at Barclays, told the news source said a number of lenders are likely to see this as an opportunity to boost their balance sheets in this "challenging interest rate environment".

By Claire Archer

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