What is Additional Tier-1 Bonds?

26-08-2023

10:36 AM

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1 min read
What is Additional Tier-1 Bonds? Blog Image

Overview:

Recently, The Bombay High Court Friday quashed the write-off of Additional Tier-1 (AT1) bonds worth Rs 8,400 crore issued by Yes Bank Ltd, bringing relief to investors.

About AT1 bonds

  • These bonds are unsecured bonds that have perpetual tenors, are issued by banks and have no maturity date. 
  • They have a call option, which can be used by the banks to buy these bonds back from investors. These bonds are typically used by banks to bolster their core or tier-1 capital.
  • These AT1 bonds are subordinate to all other debt and only senior to common equity. 
  • These bonds were introduced by the Basel accord after the global financial crisis to protect depositors.

 


Q1) What is the Basel Accord?

It refers to a series of three international banking regulatory meetings that established capital requirements and risk measurements for global banks.

Source: Additional Tier-1 bonds, and the case against Yes Bank