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Opinion
Matt Levine

Santander Didn’t Pay Its Non-Debt

Also harassment, competition policy, nuclear incidents and influentials.

A cornerstone of banking regulation is “capital.” Banks mostly fund themselves by borrowing money, but the problem with borrowing money is that you have to pay it back, which adds risk to your business. So banks are required by law to fund themselves with a certain amount of capital, which is essentially money that they don’t have to pay back. If things go wrong, they can just not pay back some of the stuff that they don’t have to pay back: The capital bears the losses.

The simplest kind of capital is common equity: If you issue stock, you never have to pay it back. But common equity is generally considered “expensive” — in that bank shareholders are thought to desire, often in a very abstract sense, a 10-plus-percent return on their equity — and so banks want to have cheaper forms of capital. One cheaper form of capital is “Additional Tier 1 Capital securities,” which are generally bond-like things (you issue them at a fixed price, they pay interest, etc.) with some equity-like features, particularly :