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IRDAI allows insurers to invest in Basel III bonds

Insurers cannot invest in AT1 bonds of their promoter group bank or where the bank is their corporate agent

M Saraswathy  |  Mumbai 

irdai, IRDAI
IRDAI logo

Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurance companies to in Additional Tier 1 (Basel III compliant) perpetual bonds. Earlier, there was no clarity on investing in these instruments and they perceived it risky.

In a circular issued to insurance companies today, said that the rating of the AT1 bonds should not be less than 'AA'. Further, it said that the aggregate value of the AT1 bonds held in any particular bank cannot exceed 10 per cent of the total outstanding AT1 bonds at any time. These bonds will be a part of "equity" under investment regulations.

have been told that they cannot more than 10 per cent in AT1 bonds offered through IPO. Also, the regulator said can only in AT1 bonds of those banks that have declared dividends for preceding two years.

Further, cannot in AT1 bonds of their promoter group bank or where the bank is their corporate agent.

A is a financial instrument with no maturity date. These bonds are not redeemable but pay a steady stream of interest forever. Here, the price of a is, therefore, the fixed interest payment, coupon amount, divided by a constant discount rate, which represents the speed at which money loses value over time (partly because of inflation).

The regulator also said that the Common Tier 1 Capital (CET) including Capital Conservation Buffer of the issuer bank will have to be more than 1 per cent of the prescribed by at time of investment in these bonds.

were awaiting clarity on whether this instrument would count as a or an instrument from the sector regulator. It is anticipated that large investors like Life Insurance Corporation of India will be able to take advantage of these norms to in such bonds as also issuing banks which were earlier finding it difficult to attract to in perpetual bonds.

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IRDAI allows insurers to invest in Basel III bonds

Insurers cannot invest in AT1 bonds of their promoter group bank or where the bank is their corporate agent

Insurers cannot invest in AT1 bonds of their promoter group bank or where the bank is their corporate agent
Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurance companies to in Additional Tier 1 (Basel III compliant) perpetual bonds. Earlier, there was no clarity on investing in these instruments and they perceived it risky.

In a circular issued to insurance companies today, said that the rating of the AT1 bonds should not be less than 'AA'. Further, it said that the aggregate value of the AT1 bonds held in any particular bank cannot exceed 10 per cent of the total outstanding AT1 bonds at any time. These bonds will be a part of "equity" under investment regulations.

have been told that they cannot more than 10 per cent in AT1 bonds offered through IPO. Also, the regulator said can only in AT1 bonds of those banks that have declared dividends for preceding two years.

Further, cannot in AT1 bonds of their promoter group bank or where the bank is their corporate agent.

A is a financial instrument with no maturity date. These bonds are not redeemable but pay a steady stream of interest forever. Here, the price of a is, therefore, the fixed interest payment, coupon amount, divided by a constant discount rate, which represents the speed at which money loses value over time (partly because of inflation).

The regulator also said that the Common Tier 1 Capital (CET) including Capital Conservation Buffer of the issuer bank will have to be more than 1 per cent of the prescribed by at time of investment in these bonds.

were awaiting clarity on whether this instrument would count as a or an instrument from the sector regulator. It is anticipated that large investors like Life Insurance Corporation of India will be able to take advantage of these norms to in such bonds as also issuing banks which were earlier finding it difficult to attract to in perpetual bonds.
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Business Standard
177 22

IRDAI allows insurers to invest in Basel III bonds

Insurers cannot invest in AT1 bonds of their promoter group bank or where the bank is their corporate agent

Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurance companies to in Additional Tier 1 (Basel III compliant) perpetual bonds. Earlier, there was no clarity on investing in these instruments and they perceived it risky.

In a circular issued to insurance companies today, said that the rating of the AT1 bonds should not be less than 'AA'. Further, it said that the aggregate value of the AT1 bonds held in any particular bank cannot exceed 10 per cent of the total outstanding AT1 bonds at any time. These bonds will be a part of "equity" under investment regulations.

have been told that they cannot more than 10 per cent in AT1 bonds offered through IPO. Also, the regulator said can only in AT1 bonds of those banks that have declared dividends for preceding two years.

Further, cannot in AT1 bonds of their promoter group bank or where the bank is their corporate agent.

A is a financial instrument with no maturity date. These bonds are not redeemable but pay a steady stream of interest forever. Here, the price of a is, therefore, the fixed interest payment, coupon amount, divided by a constant discount rate, which represents the speed at which money loses value over time (partly because of inflation).

The regulator also said that the Common Tier 1 Capital (CET) including Capital Conservation Buffer of the issuer bank will have to be more than 1 per cent of the prescribed by at time of investment in these bonds.

were awaiting clarity on whether this instrument would count as a or an instrument from the sector regulator. It is anticipated that large investors like Life Insurance Corporation of India will be able to take advantage of these norms to in such bonds as also issuing banks which were earlier finding it difficult to attract to in perpetual bonds.

image
Business Standard
177 22

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