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    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:
    A AT 1 bonds Correct Answer Incorrect Answer
    B Long Term bonds Correct Answer Incorrect Answer
    C AT 2 bonds Correct Answer Incorrect Answer
    D Investment Grade bonds Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    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. ┬а

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