Hybrid capital

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Law - financial reporting - tax - credit rating.

Hybrid capital instruments have features both of equity and of debt.

Relevant equity features may include:

  • Entitling the issuer to defer or cancel coupon (interest) payments.
  • Being treated as equity for financial reporting purposes.
  • Being regarded as equity for credit rating purposes.
  • Qualifying as regulatory capital, especially under the regulatory capital rules for banks and insurance companies.

Relevant debt features may include the tax-deductibility of coupon payments.

See also