SYDNEY: The decision by Australia’s banking watchdog to phase out Additional Tier-1 (AT1) bonds mark the end of local lenders issuing the riskiest type of bank debt.
Big international banks are now moving in to fill the void.
London-based Barclays Plc is the latest to offer AT1 bonds in the Australian dollar.
Earlier this year, Switzerland’s UBS Group AG sold A$1bil of AT1s in the currency, while France’s BNP Paribas SA raised A$750mil of capital in late 2025.
This spurt of activity, unusual for foreign banks in Australia, is set to meet demand from local investors who lost out on a source of high-yielding securities after the regulatory changes.
With no competition from local banks, some of the biggest players in the global AT1 market are now taking over this corner.
“These banks are using the captive local demand given the phase out of AT1s that were being issued by the local banks,” said Jakub Lichwa, portfolio manager at TwentyFour Asset Management.
Banking regulator, the Australian Prudential Regulation Authority, took the decision to scrap the AT1 class for local lenders in the wake of Credit Suisse’s collapse, which led to the wipeout of A$17bil of bonds.
Existing AT1s could be repaid in the future, with regulatory capital mostly coming in the form of Tier-2 bonds and equity.
The local market, mostly listed in the domestic stock exchange to draw retail investors, amounts to about A$40bil, according to a 2025 report by Commonwealth Private, Commonwealth Bank of Australia’s wealth management arm. — Bloomberg
