Trust preferred securities. TRuPs are hybrid securities that have certain equity-like and certain debt-like features and provide efficient capital for the bank holding companies that issued these securities, as the payments on the securities were tax deductible to the issuer, and TRuPs qualified for Tier 1 regulatory capital treatment pre-Basel III. During the financial crisis, ratings on TRuPs were downgraded and investors and regulators lost confidence in their loss absorption capabilities. As a result, under Basel III, TRuPs (and other hybrid and “innovative” securities) have been phased out and are no longer eligible for Tier 1 credit. Under the US capital rules, there is a limited exemption for community banks that issued TRuPs.

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