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Introduction of additional Tier 1 capital

Thomas Heidorn and Andreas Pottmeyer

No 229, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: The aim of this working paper is to introduce the reader to the relatively new instrument of AT 1 bonds. For this purpose, the strict regulatory requirements for the instrument class are explained and the capital requirements of banks are outlined. Afterwards, the market for AT 1 bonds is analyzed and the interests of the respective market participants are discussed. Finally, the Credit Derivatives Model, the Equity Derivatives Model and the Value at Risk model are applied to 20 AT 1 bonds issued by various European banks in order to find the extra credit spread and to determine the risk associated with this bond class.

Keywords: AT1; Additional Tier 1; Regulatory Requirements; Bank Capital Management; Capital Buffer; Capital Requirements Regulation (CRR); Capital Requirements Directive IV; Hybrid Tier 1; Pillar 1 Requirements (search for similar items in EconPapers)
JEL-codes: G12 G18 G28 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ban and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fsfmwp:229

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