Bank AT1 securities have unique characteristics under the CRR regulation. These securities are perpetual with no defined maturity, with a discretionary and non-cumulative coupon. However, the major risk is the loss absorption mechanism, which is triggered when the CET1 ratio falls below a predefined threshold, resulting in conversion into shares or a nominal write-down. This mechanism is specific to AT1 and not to other types of subordinated debt.

The losses suffered by AT1 holders during the acquisition of Credit Suisse by UBS in March 2023 illustrate regulatory risk. This event demonstrated how prudential developments can directly affect the value of subordinated securities. It is a concrete and recent example highlighting the importance of monitoring regulatory changes.

Any early redemption of Tier 2 securities requires prior authorization from the supervisor (ACPR in France). This condition is specific to Tier 2 securities and distinguishes their management from other types of subordinated debt. It limits the issuer's flexibility and adds an important regulatory layer.

The creditor hierarchy determines the order of repayment in case of default. Subordinated securities include senior non-preferred debt, Tier 2 securities, AT1 securities, and equity (CET1). Secured senior debt is repaid first, followed by unsecured senior debt, then senior non-preferred debt, Tier 2 securities, AT1 securities, and finally CET1. AT1 and Tier 2 securities are specifically identified as subordinated.

The characteristics of AT1 securities are detailed. They are perpetual with no defined maturity, with a discretionary and non-cumulative coupon. The loss absorption mechanism is crucial, with a trigger generally set at 5.125% or 7% of the CET1 ratio. These elements are essential for understanding their operation and risk.

Tier 2 securities have a minimum maturity of 5 years. This characteristic distinguishes them from other types of subordinated debt, such as AT1 securities which are perpetual. The minimum maturity is an important factor for assessing the risk and liquidity of these securities.

Insurance RT1 (Tier 1) securities have a discretionary and non-cumulative coupon, similar to bank AT1 securities. This means that if payment is suspended, it will not be caught up subsequently. This characteristic is crucial for assessing the risk of these securities compared to other categories of subordinated debt in the insurance sector.

AT1 coupons are discretionary and non-cumulative, meaning the issuer can cancel their payment without this suspension giving rise to any subsequent catch-up rights. Furthermore, this suspension does not trigger a default, unlike other types of debt. This is a key point for understanding the risk associated with these securities.