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* US market swallows US$18.05bn of loss-absorbing debt
* French trio print first US dollar senior non-preferreds
* UK, Swiss banks try out callable holdco structure
By Tom Porter
LONDON, Jan 6 (IFR) - The US dollar market proved more thana match for US$18.05bn of European banks' loss-absorbing debtsupply this week, giving a glimpse of the year ahead as banksflock to the deepest bond market to meet new regulatoryrequirements.
BNP Paribas, Credit Agricole and Societe Generale printedUS$5.3bn in the first US dollar senior non-preferredtransactions, while Barclays, Lloyds, Santander UK and CreditSuisse raised US$12.75bn in holding company debt.
The US dollar market grew in importance for European banksduring 2016 after bouts of volatility all but shut the Europeanmarket, and is set to play a vital role again in 2017 as banks'currency of choice to help them comply with new regulations.
"The Yankee market has been the standout in how open thathas been," said Matthew Rees, portfolio manager at Legal &General Investment Management.
"It will definitely help in terms of the amount of holdco[senior debt] to be issued this year."
The US investor base has proven to be deep and morecomfortable with the risks of loss-absorbing debt than itsEuropean counterpart.
That depth of demand will be tested more than ever thisyear, with the 40 largest banks in Europe still some 400bnshort of the total loss-absorbing debt they will have to hold by2022, according to figures from BNP Paribas.
"Dollars gives you an early start, the potential formulti-tranche execution and negligible new issue premium, sowhat's not to like?" said Miray Muminoglu, co-head of capitalmarkets execution in treasury at Barclays.
"In euros and sterling you may not always be able to get theboxes ticked on all of those. If you want to do fewer trips inlarger sizes, dollars is the market to execute that."
APRES LES REGLES, LE DELUGE
Issuance of loss-absorbing instruments will take on newvigour in 2017 now that the fog has started to lift on thequantum and form of debt that Europe's banks must raise in orderto avoid future taxpayer bailouts.
The European Commission has given a clearer direction to theregion's banks for how they will need to meet minimumrequirement for own funds and eligible liabilities (MREL) andtotal loss-absorbing capacity (TLAC) requirements.
A number of institutions have so far been held back by thepace at which their local legislators have adapted to thedemands.
French banks have already demonstrated what regulatoryclarity can do for supply after the country's lawmakers approvedthe creation of a senior non-preferred product late last year.
Credit Agricole opened the market in December with a 1.5bn10-year, while Societe Generale followed shortly after.
This week, BNP Paribas and Credit Agricole shared the podiumfor the first deals in US dollars. The former sold US$1.75bn atseven-years, and the latter a US$2.3bn three-parter featuringfive-year fixed and floating notes and a 10-year fixed.
Credit Agricole's plan to issue 12bn of seniornon-preferred and Tier 2 debt by 2019 is dwarfed by BNP Paribas,which intends to print 30bn of the new-style senior debt aloneover that period.
THINGS CAN ONLY GET WORSE
Away from French banks, the US investor base still hadappetite for a further US$12.75bn of bail-in-able debt,including the first callable holdco deals from Europe in USdollars.
Barclays, Santander UK and Credit Suisse followed the trendstarted by US banks last year as a way to meet loss-absorbingdebt requirements, adding call options one year before maturityin some tranches.
A US$5bn four-tranche Barclays deal was the standout,featuring 6NC5 fixed and floating, 11NC10 and 30-year tranches.
Santander UK sold a US$1bn 6NC5 deal, while Credit Suissefollowed up with US$1.75bn of 6NC5s and US$2.25bn of 11NC10s.
Add in a US$2.75bn dual-tranche five and 10-year holdcosenior from Lloyds, and many market participants were gettingthe feeling Europe's banks are in something of a hurry.
"It's not just the upcoming inauguration [of Trump as USPresident] - it's also the fact that there are a number ofimportant political events in Europe this year," said one NewYork-based syndicate banker.
"People are taking the view that even if it doesn't getworse, it can't get much better, and there are potentialcatalysts for market widening." (Reporting by Tom Porter, Additional reporting by AliceGledhill and Will Caiger-Smith, editing by Helene Durand, JulianBaker)
