Australian Minister announced strength and control of banking system
2023.03.27 19:06
Australian Minister announced strength and control of banking system
By Kristina Sobol
Budrigannews.com – The assistant treasurer stated on Tuesday that Australian law would not permit regulators to wipe out AT1 tier credit holders while shareholders received compensation, as was the case during the Swiss government-brokered takeover of Credit Suisse by UBS.
“Our legal frameworks are very different, but our banks are unquestionably strong. We do not need to descend the rabbit hole of “what if?” At the Australian Financial Review Banking Summit in Sydney, Assistant Treasurer Stephen Jones stated, “It’s a completely different set of circumstances here in Australia.”
“We are in a world that is very different from what has happened out there.”
As part of a forced rescue merger with UBS, Swiss regulators reduced Credit Suisse bonds worth 16 billion Swiss francs ($17.5 billion) to zero. These bonds are referred to as Additional Tier 1 debt, or AT1 debt.
Shareholders, who typically receive less compensation in the event of a bank or company’s collapse than bondholders, will receive $3.23 billion as a result of the agreement. Holders of Credit Suisse AT1 bonds received nothing in return.
If a bank’s capital levels fall below a certain threshold, AT1 bonds, a $275 billion sector also known as “contingent convertibles” or “CoCo” bonds, act as shock absorbers. They can be written off or turned into equity.
