A closely watched debt instrument issued in the 1980s by what is now DNB Bank ASA cannot be counted as fully-eligible tier 2 capital, Europe’s banking watchdog said, in a potential headache for lenders that have used these super-low-interest products to plug capital holes.
The European Banking Authority said the lender cannot count these perpetual notes, known as discos, as such because of their tax-related terms as well as hard-to-determine treatment in the event of a liquidation.
The EBA made its comments in a letter published Thursday to a law firm representing the Norwegian bank’s bondholders. It said it had ...