BoE reasserts equity investors should bear losses before AT1 bondholders

Follows Credit Suisse wipe-out

The Bank of England has joined European financial regulators in reasserting that holders of additional tier one (AT1) bonds should bear losses only after equity holders have been fully wiped out.

In a statement today (20 March), the central bank said the UK's bank resolution framework has a "clear" statutory order in which shareholders and creditors would bear losses in a resolution or insolvency scenario.  This was the approach used for the recent resolution of SVB UK, the Bank said, in which all of SVB UK's AT1 and T2 instruments were written down in full and the firm's equity was transferred for a nominal sum of £1. What are AT1 bonds and why is Credit Suisse's $17bn wipeout controversial? "AT1 instruments rank ahead of CET1 and behind T2 in the hierarchy. Holders of suc...