The Dodd-Frank financial reform is allowing banks to redeem trust preferred securities at face value for 90 days. So far, large banks haven't used the redemption provision and they may not take the opportunity at all.

The new law is offering this option as trust preferred securities, also called Trups, will no longer qualify as Tier 1 capital. The exclusion will begin in 2013.

There are currently about $118 billion of Trups outstanding that were issued by banks including Bank of America, JPMorgan, Morgan Stanley and Citigroup. Trups are hybrid securities that mix attributes from debt and from equity.

But buying back Trups implies a reduction of regulatory capital, which would increase risk at banks and may not please their regulators. Banks could replace the Trups with fresh capital, most likely equity, but it would  make it expensive for them and it would also reduce liquidity resources.

Investors, who may have initially purchased the securities to hold them for the long term, may not be too happy either if banks opt to redeem. "Banks may find it desirable to redeem Trups but they have to think about what they are going to say to investors next time they want to raise capital," Chip MacDonald, a partner at law firm Jones Day, told the Financial Times. Some Trups can yield over 8 percent.

As a result, very few banks will likely refrain from redeeming Trups unless capital markets provide an advantageous opportunity.