APRA eyes phasing out AT1 bonds
The Credit Suisse crisis shows that the bonds don't necessarily provide stability to banks and investors as designed; APRA has proposed a different capital framework from January 1, 2027.
ShanonG
September 10, 2024
The Australian Prudential Regulation Authority APRA is proposing changes to phase out the capital Additional Tier 1 AT1 bonds within the capital framework of banks.
APRA said that the proposed changes, outlined in a discussion paper released on September 10, seek to support financial system stability at times of crisis with simpler and more certain resolution of banks in the unlikely event of failure. They are also aimed at reinforcing confidence in the safety of deposits at times of stress.
APRA is proposing that banks phase out the use of AT1 capital instruments, also called hybrid bonds, and replace them with cheaper...
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