ME Bank will meet with investors this week, ahead of a potential Basel III compliant, tier two capital raising.Institutional investors have proved to be keen investors in such issues this year, despite the potential for coupon payments to be deferred (on account of the solvency test) and the inclusion of a non-viability trigger, which can result in the tier two capital being converted into ordinary equity or written-off. Just over A$2 billion of tier two capital has been issued in the wholesale market this year.In 2013, issuance of Basel III compliant tier two capital was limited to retail investors, as remains the case for "additional tier one" capital.If ME Bank does proceed with a tier two capital issue in the wholesale market, it will be the fourth such issue this year. However, it will come with differences - ME Bank is a private company, not a publicly listed entity.The bank has not provided any details of its planned capital raising.ME Bank is owned by 30 industry superannuation funds and is run for the benefit of their members. The current shareholders may not welcome any new shareholders arising from a mandatory conversion of the tier two capital.While this is the similar to the situation faced by any mutual bank that wants to issue tier two or even additional tier one capital, it is not quite the same. APRA amended the prudential standard APS 111, Capital Adequacy: Measurement of Capital, to allow mutually owned ADIs to issue Basel III compliant additional tier one and tier two capital and conversion into "mutual equity interests", in need.While MEIs have been put forward as a solution for mutual banks needing to raise capital, MEIs appear unworkable from a practical perspective and are unlikely to provide a solution for ME Bank.However, New Zealand's Kiwibank found an alternative solution to the problem earlier this year that ME Bank could follow, depending on the views of institutional investors.Kiwibank is wholly-owned by New Zealand Post but raised Basel III compliant tier two capital through a sister company, Kiwi Capital Funding Limited. Kiwi Capital issued notes to retail investors and used the proceeds to buy convertible subordinated notes issued by Kiwibank.Investor returns on the Kiwi Capital Funding notes are directly linked to the returns on the notes issued by Kiwibank. If the Kiwibank notes convert to Kiwibank equity at the point of non-viability, as determined by the Reserve Bank of New Zealand, the Kiwi Capital Funding notes will become perpetual with any coupon paid being determined by whether Kiwibank pays a dividend or not.The notes issued by Kiwi Capital are listed on the NZDX, providing the only means of exiting the investment after the point of non-viability.This solution worked for retail investors but institutional investors may not be enamoured with the prospect of holding perpetual notes listed on the ASX if ME Bank is confronted with non-viability. As with MEIs, a simple write-off of the notes at the point of non-viability may be more expedient.