Australia’s plan to scrap AT1 bonds unlikely to affect Singapore banks

SINGAPORE banks are unlikely to face any near-term impact from a proposal by Australia’s banking regulator to phase out the use of additional tier-1 (AT1) bonds, analysts said.

The local banks will only be affected if Singapore’s regulators follow suit, but analysts said this is unlikely to happen given the nature of investors in Singapore that invest in AT1s versus Australia.

AT1 bonds are bank debt that form part of a lender’s capital. They are often regarded as a riskier investment as they rank lower in the order of claims than ordinary bonds when a financial institution fails.