MUFG to bolster capital with green bonds www.asia.nikkei.com
TOKYO -- Striving to meet stricter capital requirements for banks, Mitsubishi UFJ Financial Group plans to raise up to $3 billion through bonds specifically aimed at financing renewable energy projects.
The first batch of bonds, worth $500 million, is to be issued in September as part of a $3 billion issuance of so-called TLAC bonds. The Japanese megabank is looking to tap into growing demand for environment-friendly projects among institutional investors. Eventually, MUFG plans to increase the size of its green bond issuances to between 200 billion yen and 300 billion yen ($1.93 billion and $2.9 billion).
TLAC bonds are subordinated securities issued to raise an institution's "total loss-absorbing capacity." Debt acquired through loss-absorbing securities is deemed de facto equity capital. Since the holders are subject to losses, the obligations need not be repaid if the issuer goes bust. This is designed to shift risk onto the shoulders of investors, and away from the global financial system.
The international Financial Stability Board introduced the TLAC standard to ensure that systemically important banks have sufficient cushions -- minimizing danger to the financial sector and reducing the need for public bailouts.
MUFG plans to invest funds raised through its green bonds on photovoltaic, solar thermal and wind energy projects.
The bank is targeting mainly foreign investors with the seven-year bonds. It assumes an annual yield in the upper half of 2%, about 1 percentage point higher than that of U.S. securities with the same time to maturity.
(Nikkei)
Published Date:2016-09-06