easy · Frm Part 2 Current Issues
Following the Swiss AT1 episode, authorities in the United Kingdom and the European Union issued public statements to clarify their stance.
What was the central message of these clarifications?
- That common equity remains the first layer to absorb losses, and the statutory creditor hierarchy will be respected in their jurisdictions.
- That they would immediately abolish the AT1 asset class to prevent similar market shocks.
- That they would adopt the Swiss model and zero AT1 bonds before equity in all future rescues.
- That AT1 bonds in the UK and EU are now guaranteed by the government to prevent bank runs.
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