Germany Drops Push to Exclude AT1s From Key Bank Capital Measure

Germany has backed away from the most radical elements of its proposal to revamp banks’ use of Additional Tier 1 bonds and is now discussing ways to strengthen the debt instrument rather than curtailing its use.

Germany’s central bank and watchdog BaFin last year mooted a radical simplification of capital rules which would have restricted AT1’s use to the reserves banks hold for potential wind downs. Current rules allow banks to also use AT1 instruments for their going concern capital, a key metric that is mostly filled with equity.