AT1 calls: how about a little freedom?

There is nothing wrong with letting banks decide for themselves if refinancing an additional tier one is in their own best interests.

  • By Tyler Davies
  • 28 Mar 2019
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As the first wave of AT1s has started arriving at call dates, investors have been grappling with questions about how best to determine if a bank is likely to refinance a deal.

This recent sense of agitation around AT1 calls been predicated on the idea that regulators have no desire to see financial institutions redeeming securities if they cannot roughly match the cost of capital with a new issuance in the market.

Banco Santander added fuel to that fire earlier this year when it extended the life of an AT1 because it reset to pay a spread over mid-swaps that it deemed as being economic.

But recent new issues from Coventry Building Society and Nordea Bank have shown that regulators are open to debate about when an AT1 call is or is not appropriate.

Both of these financial institutions have paid up to issue new AT1s when compared with the cost of keeping an older instrument outstanding, and the regulator has given the go-ahead.

This is a welcome development. It is important that banks maintain a degree of autonomy over how they choose to manage their capital.

The rules hand regulators enough power to step in if banks are acting in a way that could endanger financial stability or put their key stakeholders at risk.

But it would be crazy to prevent an issuer from calling and refinancing an AT1 if the action would have no discernible impact on its financial strength.

As with any areas of subjectivity, it is better to leave room for flexibility and nuance.

  • By Tyler Davies
  • 28 Mar 2019

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 325,408.08 1485 8.49%
2 Citi 296,134.83 1264 7.72%
3 Bank of America Merrill Lynch 255,684.97 1074 6.67%
4 Barclays 231,691.78 956 6.04%
5 HSBC 189,101.94 1036 4.93%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 37,082.71 171 7.26%
2 Credit Agricole CIB 35,705.77 154 6.99%
3 JPMorgan 29,353.75 74 5.75%
4 Bank of America Merrill Lynch 23,923.68 67 4.69%
5 SG Corporate & Investment Banking 23,666.95 111 4.64%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 10,133.31 66 9.96%
2 Morgan Stanley 9,408.95 44 9.25%
3 Goldman Sachs 8,721.03 45 8.57%
4 Citi 6,714.07 51 6.60%
5 UBS 5,276.75 29 5.19%