medium · Debt Capital Markets bond-instruments-structures
A bank issues an Additional Tier 1 (AT1) instrument with a 5.125% CET1 trigger.
In a resolution scenario, what are the two defining features of this instrument that distinguish its risk profile from Senior Non-Preferred debt?
- Dual recourse to a cover pool and acceleration rights upon any rating downgrade.
- Discretionary non-cumulative coupons and a principal write-down or conversion trigger.
- Mandatory non-skippable coupons combined with a fixed and stated final maturity date.
- Cumulative interest that fully accrues within the liquidation waterfall ahead of equity.
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