Mutual banks and credit unions will have more options to raise hybrid capital, under amendments to the regulations on "mutual equity interests" released yesterday.The Australian Prudential Regulation Authority amendments will allow mutuals to issue securities that include triggers which can convert to mutual equity interests.Under the Basel III capital framework, certain capital instruments must be written off or converted to ordinary shares if loss absorption or non-viability provisions are triggered. However, conversion into ordinary shares is not possible for mutuals due to their corporate structure. The creation of mutual equity interests gets around the problem.APRA capped the "distributions paid on all mutual equity interests, and any investor shares issued" at 50 per cent of the issuer's net profit "for the annual period in which the distribution is made." It said that dividends must be payable only out of that period's profits.APRA also said that mutual equity interests "must carry no voting or other rights beyond any claim on the residual assets," or as otherwise required by the Corporations Act.It said there must be "no specified dates or events being set for exercise of any option to repurchase mutual equity interests," but it will allow the option of discretionary repurchase, subject to APRA approval.The Customer Owned Banking Association said the changes were "a welcome step toward better accommodation of the customer owned banking model."COBA chief executive Louise Petschler said in a statement that "when APRA implemented the Basel III capital changes 16 months ago, customer owned banking institutions were confronted with a much reduced capacity within the new rules to issue regulatory capital instruments. "This was because the rules were designed for large, listed banks and not for customer owned banking institutions. "APRA has worked with COBA to resolve this problem and today's announcement represents significant progress," she said.COBA said it would continue to lobby APRA and other regulators "on further accommodation of the customer owned model."