hard · Debt Capital Markets bond-instruments-structures

In the resolution of a globally systemic bank, which of the following best describes the risk demonstrated by the 2023 write-down of Additional Tier 1 (AT1) instruments while equity holders retained some value?

1. The write-down was caused by a breach of the 5.125% Common Equity Tier 1 trigger ratio.
2. Equity credit for hybrid capital is granted by agencies only if the notes are perpetual and non-callable.
3. The contractual loss-absorption hierarchy can be overridden by statutory resolution regimes.
4. AT1 instruments rank senior to common equity in every bankruptcy and resolution scenario.

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