AXJ Banks to favour LCY markets

AXJ banks will likely raise most of their capital requirements in LCY markets.

However, those in bankingsystems with large capital requirements are likely to diversify their capital raising to international Banks are likely to raise most of their AT1 and T2 capital requirements in LCY markets.

Sub-senior ratios in LCY markets are much lower, as the subordination premium demanded by local investors is lower than that demanded by international investors. 

Standard Chartered Bank notes in a report on Wednesday:

• We expect banks in countries where capital requirements are high to raise capital in G3 capital markets. Local market dynamics are likely to be different in each country, and each market should be considered separately.
  
  
• We expect China to be the biggest issuer in USD markets given the absolute amount of capital required, although the bulk of this requirement is likely to be raised locally. It is cheaper to issue locally and local markets are deep.
• We expect 20-25% of capital to be issued in USD markets partly also due to the banks' foreign-currency (FCY) funding requirements. Banks with such requirements will likely use G3 markets for bank capital issuance.