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HMRC internal manual

Corporate Finance Manual

From
HM Revenue & Customs
Updated
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Understanding corporate finance: regulatory capital: the legal and regulatory framework: tiers of capital: Permanent Interest Bearing Shares

Permanent Interest Bearing Shares

A building society may issue permanent interest bearing shares (PIBS) to strengthen their capital base, and which form part of a building society’s Tier 1 capital (CFM14120). These are defined as deferred shares for the purposes of BSA86/S119.

To qualify as PIBS the shares must have the following characteristics:

  • Permanence. There can be no repayment with the exception of winding-up or with the consent of the FSA.
  • Interest bearing. The rate may be fixed or variable. The rate may be directly related to the society’s profits.
  • Non-cumulative. Investors lose the right to any interest that is passed.
  • The payment of interest can be passed or abated if the society’s capital position would otherwise be impaired.
  • The writing down of the outstanding principal can absorb losses.
  • Rank behind ordinary building society shares on a winding-up.
  • Become subordinated debt if the building society converts to a plc.