hard · Debt Capital Markets
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 have a 'put' option to sell the bond back to the bank if its credit rating is downgraded.
- The instrument is secured by a specific pool of high-quality mortgage assets.
- The bond has a fixed maturity date of 10 years to align with regulatory amortization rules.
- Coupons are fully discretionary and non-cumulative, meaning the bank can skip payments without defaulting.
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