Question
The unsecured, perpetual and non-convertible bonds
issued by banks in order to secure an external capital base to be used in times of a financial emergency without being subjected to insolvency and distress measures are called:Solution
AT1 Bonds stand for additional tier-1 bonds. These are unsecured bonds that have perpetual tenure. In other words, the bonds have no maturity date. They have a call option, which can be used by the banks to buy these bonds back from investors. These bonds are typically used by banks to bolster their core or tier-1 capital. They carry a higher rate of interest and they are riskier than other debt instruments. Â
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