What Happened to Additional Tier 1 (AT1) Bonds?
Additional Tier 1 (AT1) bonds are perpetual, high-risk debt instruments issued by banks to absorb losses and strengthen their capital base under Basel III regulations. Following a controversial full write-down of Credit Suisse's AT1 bonds in March 2023, the market experienced significant volatility and legal challenges, but has since largely recovered with strong investor demand and continued issuance into 2026, even as regulatory discussions about their future role persist.
Quick Answer
Additional Tier 1 (AT1) bonds are hybrid securities that banks use to meet regulatory capital requirements, offering high yields in exchange for loss-absorption features, including potential write-downs or conversion to equity. The market faced a major shock in March 2023 when Credit Suisse's AT1 bonds were fully written down, sparking investor outrage and legal disputes. As of August 2026, the AT1 market has demonstrated resilience, with robust issuance activity, strong investor demand for longer-dated bonds, and ongoing legal proceedings challenging the Credit Suisse write-down, while regulators continue to evaluate their role in bank stability.
📊Key Facts
📅Complete Timeline14 events
Basel III Framework Introduced
The Basel Committee on Banking Supervision introduces Basel III, a global regulatory framework designed to strengthen bank capital requirements and liquidity, leading to the creation of AT1 bonds.
European Regulators Create Specific AT1 Bonds
European regulators establish specific AT1 bonds as a key part of the new resolution regime to increase the quantity and quality of capital held across the banking system.
Yes Bank AT1 Bonds Written Off
In India, Yes Bank's AT1 bondholders face a complete write-off, leading to significant losses and highlighting the inherent risks of these instruments.
Credit Suisse AT1 Bonds Written Down to Zero
As part of the emergency acquisition of Credit Suisse by UBS, Swiss authorities order a controversial full write-down of approximately US$17.8 billion of Credit Suisse's AT1 bonds, sparking global investor outrage.
Immediate Market Volatility and Scrutiny
The Credit Suisse write-down causes significant volatility in the AT1 market and prompts widespread debate over the seniority of claims and the future of AT1 instruments.
AT1 Market Begins Recovery
Despite initial concerns, the AT1 market shows signs of recovery with continued issuance and investor demand, as banks seek to refinance upcoming call dates.
European AT1 Market Positioned for Continued Demand
Analysis indicates the European AT1 market is well-positioned for 2025, supported by strong bank fundamentals, regulatory clarity, and attractive yields, with €15 billion in AT1 bonds set to mature.
Swiss Court Questions Legality of Credit Suisse AT1 Write-down
The Swiss Federal Administrative Court rules that the legal foundation for the full write-down of Credit Suisse's AT1 bonds was unclear, providing a potential boost for bondholders' legal challenges.
ECB Recommends Enhancing or Phasing Out AT1s
The European Central Bank (ECB) issues recommendations to either enhance the loss-absorbing features of AT1s or remove them, rekindling debate over their role in bank capital structures.
Intesa Sanpaolo Places €1.25 Billion AT1 Bond
Intesa Sanpaolo successfully places a dual-tranche perpetual AT1 bond for €1.25 billion, achieving its lowest reset spread ever, demonstrating strong market confidence.
AT1 Market Sees Surge in Demand for Longer-Dated Issues
The AT1 bond market experiences extraordinary demand, with banks issuing longer-dated securities (up to ten-year non-call periods) to lock in borrowing costs, reflecting strong investor appetite and comfort with the regulatory framework.
BIS Paper on Strengthening AT1's Going-Concern Role
The Bank for International Settlements (BIS) publishes a paper discussing options and trade-offs for strengthening the 'going-concern' role of AT1 bonds, suggesting reforms to support early recapitalization.
SBI Raises ₹4,691 Crore via AT1 Bonds
State Bank of India (SBI) successfully raises ₹4,691 crore (approximately $490 million) through its first AT1 bond issue of the fiscal year, with a 7.75% coupon and strong investor demand.
AT1 Spreads Tighten Amid Strong Market Sentiment
BofA's Bull & Bear Indicator shows tighter global high-yield and AT1 spreads, reflecting strong market sentiment and continued investor confidence in the asset class.
Follow this story
Get an email when this timeline gets a major update.
🔍Deep Dive Analysis
Additional Tier 1 (AT1) bonds, also known as contingent convertibles (CoCos), emerged as a crucial component of bank capital structures following the 2008 global financial crisis. Introduced under the Basel III regulatory framework, these perpetual debt instruments are designed to absorb losses when a bank's capital falls below a pre-determined trigger level, or if authorities deem the institution non-viable. Their primary purpose is to bolster a bank's core equity base without diluting existing equity ownership, providing a safety net during financial stress and reducing the need for taxpayer-funded bailouts.
The most significant turning point for the AT1 market occurred in March 2023 during the emergency acquisition of Credit Suisse by UBS. Swiss authorities controversially ordered a full write-down of approximately US$17.8 billion of Credit Suisse's AT1 bonds to zero, while equity holders received some compensation. This decision upended the traditional loss-absorption hierarchy, where bondholders typically rank above shareholders, causing widespread investor fury and significant market volatility. The move led to a re-evaluation of AT1 bond risks and the legal frameworks governing their write-down.
In the aftermath of the Credit Suisse event, the AT1 market experienced initial disruption, with concerns about reputational damage and potential for higher issuance costs. However, the market demonstrated remarkable resilience. By late 2023 and throughout 2024, issuance volumes began to recover, driven by banks' needs to refinance upcoming call dates and strong investor appetite for the attractive yields offered by AT1s. European regulators reaffirmed the importance of AT1s in bank funding structures, providing some clarity on loss-absorption mechanisms.
As of 2026, the AT1 market continues to show strong demand. In May 2026, banks were observed rushing to issue longer-duration AT1 securities, locking in borrowing costs for up to a decade, indicating growing investor comfort with the regulatory framework and expectations of sustained interest rates. Major banks like Intesa Sanpaolo and Inbank successfully placed new AT1 bonds in February and May 2026, respectively, often at competitive spreads. In July 2026, India's largest lender, State Bank of India (SBI), raised ₹4,691 crore (approximately $490 million) through its first AT1 bond issue of the fiscal year, attracting robust demand.
Despite the market recovery, legal and regulatory scrutiny persists. In October 2025, the Swiss Federal Administrative Court ruled that the legal foundation for the Credit Suisse AT1 write-down was unclear at the time, casting doubt on the legal basis for the decision. While the court did not reinstate the bonds or award compensation, this ruling has strengthened treaty-based arbitration claims by affected foreign investors. The European Central Bank (ECB) also made recommendations in January 2026 to either enhance AT1 features to ensure loss-absorption in a 'going-concern' scenario or consider removing them, though a complete phase-out is considered unlikely due to legislative practicalities and market viability concerns. Overall, the AT1 market in mid-2026 is characterized by robust issuance and investor confidence, alongside ongoing legal challenges and regulatory discussions aimed at refining their role in banking stability.
What If...?
Explore alternate histories. What if Additional Tier 1 (AT1) Bonds made different choices?