medium · Debt Capital Markets bond-instruments-structures

In the context of bank capital, why is an Additional Tier 1 (AT1) bond considered 'going-concern' capital whereas a Tier 2 bond is 'gone-concern' capital?

1. AT1s contain triggers for principal write-down or equity conversion while the bank is still operating; Tier 2s only absorb losses at the point of non-viability.
2. Going-concern capital denotes only those instruments that carry a contractually fixed maturity date, a feature that applies to AT1 bonds but never to Tier 2 issues.
3. AT1 bonds rank senior to Tier 2 bonds within the bank's capital stack, affording AT1 holders greater protection during normal operations.
4. Tier 2 bonds permit the issuing bank to suspend all interest payments during a crisis, whereas every AT1 coupon obligation remains strictly mandatory and payable in full.

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