easy · Debt Capital Markets bond-instruments-structures
A bank is issuing an Additional Tier 1 (AT1) bond. Which structural feature is unique to this instrument compared to a Tier 2 subordinated bond?
- Investors hold a contractual put option to sell the bond back to the bank if its rating is downgraded.
- The instrument is secured against a ring-fenced pool of high-quality residential mortgage loans on balance sheet.
- The bond carries a fixed maturity date of ten years to align with the regulatory amortization rules for capital.
- Coupons are fully discretionary and non-cumulative, meaning the bank can skip payments without defaulting.
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