Buy-back window for Trups opened

16 August 2010

A 90-day buy-back window for high-cost securities has been opened for banks as part of the Dodd-Frank financial reform changes.

Wall Street firms have the option of redeeming "trust preferred securities" - known as Trups – as they will no longer be registered as tier one capital, which is a central gauge of a bank's financial strength, from 2013 under the new regulations.

Around $118 billion of Trups may be reclaimed as the legal change allows issuers three months to redeem them at face value, reports the Financial Times.

Chip MacDonald from law firm Jones Day said: "Banks may find it desirable to redeem Trups but they have to think about what they are going to say to investors next time they want to raise capital."

Earlier this month, AIG stated that it may have to raise capital and limit its investments in private equity and hedge funds in order to comply with the rules of the Dodd-Frank Act, reported Bloomberg.

By Gary Cooper

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