medium · FRM Part 2 Current Issues
Following the 2023 AT1 shock, regulators in certain jurisdictions (such as the UK and EU) issued statements regarding the 'Creditor Hierarchy.'
What was the primary purpose of these statements?
- To declare that viability events would no longer be discretionary and would only be triggered by mechanical CET1 breaches.
- To set a maximum limit on the amount of AT1 a bank can hold relative to its CET1 capital to limit systemic spillover.
- To confirm that in their jurisdictions, common equity would be expected to absorb losses before AT1 and Tier 2 instruments.
- To announce that all future AT1 instruments would be required to have equity conversion features rather than write-down clauses.
Sign up free to see the explanation and track your rank →
More FRM Part 2 Current Issues practice
- According to the BCBS standard for cryptoassets, a bank's to… — What is this limit?
- What primary balance (as a % of GDP) is required to stabilize the debt-to-GDP ratio?
- SVB's management removed interest rate hedges in 2022. According to the Economic Value of
- In monitoring model stability, which metric is commonly used to quantify the shift in dist
- What does a SHAP value of zero for a specific feature in a credit scoring model imply?
- A bank provides a 'NAV facility' to a private equity fund. If the fund's underlying assets
- What is the bank's primary ongoing obligation to regulators regarding this new model?
- If the firm's EBITDA declines, when can the lender intervene?