July 9, 2018 / 1:19 PM / a year ago

EBA to rule on capital treatment of UniCredit 'CASHES'

FILE PHOTO: Unicredit's bank logo is pictured on block notes and pens at the headquarters in Milan, Italy, February 9, 2016. REUTERS/Stefano Rellandini/File Photo

LONDON (Reuters) - The EU’s banking regulator said on Monday it planned to issue a ruling on the treatment of $3.5 billion of complex financial instruments issued by UniCredit (CRDI.MI) that a hedge fund says are wrongly classified by the bank as best quality capital.

The European Banking Authority (EBA) did not give a timeframe for its planned public judgment.

British hedge fund firm Caius Capital asked the EBA in May to open an investigation into the 2.98 billion euro ($3.51 billion) convertible and subordinated hybrid equity-linked securities, known as CASHES, which UniCredit issued in 2008.

Caius believes UniCredit, Italy’s biggest bank by assets, should convert the transaction into shares, which would increase the bank’s Common Equity Tier (CET) 1 capital ratio, but cause big losses for holders of the CASHES.

“As the assessment is still ongoing and different players are involved, we cannot confirm yet the exact timing of our public communication,” the EBA spokeswoman told Reuters.

Reporting by Maiya Keidan; Editing by Carolyn Cohn and Mark Potter

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