Q. Consider the following statements about AT1 Bonds:
1. These are secured bonds that have perpetual tenure.
2. These bonds are typically used by banks to bolster their core or tier-1 capital.
Which of the statements given above is/are correct?
Answer: B
Notes:
About AT1 Bonds:
·AT1 Bonds stand for additional tier-1 bonds. These are unsecured bonds that have perpetual tenure i.e., the bonds have no maturity date.
·These bonds are typically used by banks to bolster their core or tier-1 capital. These bonds were introduced by the Basel accord after the global financial crisis.
·These bonds offer higher returns to investors but compared with other debt products, these instruments carry a higher risk as well.
·AT1 bonds are subordinate to all other debt and only senior to common equity.
Source: EPIC January 2022
