Knowledge Base

Which risk mechanism is specific to bank AT1 securities?

Extension risk

Coupon cancellation risk

Loss absorption mechanism

Regulatory risk

Which event illustrated regulatory risk for AT1 holders in 2023?

The 2008 financial crisis

The European sovereign debt crisis in 2010

The acquisition of Credit Suisse by UBS in March 2023

The implementation of the BRRD directive in 2014

What is the specific feature of early redemption for Tier 2 securities?

It is prohibited without regulatory authorization

It is possible without authorization but subject to a notice period

It requires prior authorization from the supervisor (ACPR)

It is automatic after five years

What is the repayment priority of subordinated securities in the creditor hierarchy?

Secured senior debt > Unsecured senior debt > Senior non-preferred debt > Tier 2 securities > AT1 securities > CET1

Secured senior debt > AT1 securities > Unsecured senior debt > Tier 2 securities > CET1

CET1 > AT1 securities > Tier 2 securities > Senior non-preferred debt > Unsecured senior debt > Secured senior debt

AT1 securities > Tier 2 securities > Senior non-preferred debt > Unsecured senior debt > Secured senior debt > CET1

Categorize items by dragging them to the appropriate zones

Items to categorize:

Perpetual with no defined maturity

Discretionary and non-cumulative coupon

Trigger at 5.125% or 7% of CET1 ratio

Categories:

Structural characteristics

Payment characteristics

Risk mechanisms

Minimum maturity of Tier 2 securities

Click to see answer

Insurance Tier 1 securities (RT1) have a cumulative coupon.

True

False

AT1 coupons can be suspended without triggering a default for the issuer.

True

False