It is like the difference between cod roe and caviar. The bulk of state investments in banks has been in preferred stock, rather than in the purest form of capital, common shares. The difference may sound small but helps to explain why the first round of Western bank bail-outs in October has needed a follow-up.rnUnder the original 1988 Basel 1 rules governing bank capital, the bulk of banks' tier-one capital had to be common equity. This can suffer losses without defaulting, need not receive a dividend and does not have to be repaid. But banks were also allowed to include some preferred stock, which sits somewhere between debt and equity. Such hybrid capital suffers losses only once the common equity has been wiped out and typically offers more secure dividends.
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