First, should rates climb, bond values will fall, and therefore the risk of capital loss is palpable.

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The trick is for managers to slice off the risk of capital loss and sell it to somebody else, such as an insurer.

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As a result, these venture capitalists are struggling to raise new rounds of capital from their limited partners since they do not believe that the potential returns of providing that mid-level capital is worth the risk of loss.

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And Nationwide's balance sheet, on paper at least, is stronger than that of any of the big banks, with loss-absorbing core capital equivalent to 12.5% of risk-weighted assets, 2.5 percentage points higher than the banks' capital ratios.

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But that may be the lesser of two evils: capital controls might pose an even greater risk if they lead to a wider loss of confidence in other weak peripheral banking systems.

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