Asia regulators calm nerves on AT1 bonds as banks reassess new issuance
By Scott Murdoch and Makiko Yamazaki
SYDNEY/TOKYO, March 23 (Reuters) -Asian policymakers are scrambling to calm investor nerves about Additional Tier-1 (AT1) bonds after holdings of such Credit Suisse bonds were written down to zero, but the ongoing market turbulence is likely to keep a lid on fresh debt issuance.
As part of the multi-billion franc rescue of Credit Suisse CSGN.S by its rival UBS UBSG.S, Credit Suisse's AT1 bonds with a notional value of 16 billion francs would be wiped out. Shareholders, however, who usually rank below bondholders in compensation terms, will receive $3.23 billion.
The decision has angered global bond investors some of whom are working on possible legal action. The write-down to zero at Credit Suisse will produce the largest loss in the $275 billion AT1 market to date.
Hong Kong and Singapore central banks said late on Wednesday they would stick to the traditional hierarchy of creditors claims if a bank was to collapse in their respective jurisdictions.
Creditors, who receive less in a resolution compared to what they would have received had the financial firm been liquidated, would be able to claim the difference from a fund to be set up by the industry, the Monetary Authority of Singapore said.
The comments from the Hong Kong Monetary Authority and the Monetary Authority of Singapore came after European regulators, including the European Central Bank, said earlier they would continue to impose losses on shareholders before bondholders.
AT1s are a type of contingent convertible debt that are part of the capital buffers that regulators require banks to hold to protect themselves in times of market turmoil.
Despite the Asian central banks' reassurances, bankers and analysts believe regional banks will not race to issue AT1 bonds in the near term, while financial markets remain volatile and investors turn cautious towards this debt instrument.
At least two Japanese banks, Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T, were planning AT1 issuance as early as April, but both may now put the deals on hold amid the volatility, two sources told Reuters.
The sources did not want to be identified as the information is not public yet.
"In line with our past bond issues, we will make appropriate decisions while closely monitoring market conditions," Sumitomo Mitsui Financial Group said in a statement in response to Reuters queries. MUFG declined to comment.
The price of Asian banks' existing AT1s in market trading has fallen by 4.1% this week, Natixis said in a research note on Thursday, with most selling focused on global banks listed in the region.
There are $69 billion worth of outstanding dollar-denominated AT1 bonds from Asian Pacific banks, according to Goldman Sachs estimates, with mainland Chinese institutions accounting for 41% of total issuance.
Citigroup said on Wednesday that it expected the Credit Suisse fallout to trigger re-pricing of AT1 across Asian banks' capital structures.
"Demand in the near term for AT1s will likely be affected," Nigel Foo, head of Asian fixed income at First Sentier Investors, told the Reuters Global Markets Forum.
"But in the longer term, we see it as an opportunity for investors to get themselves better educated for such structures ... these instruments were designed to absorb losses."
Reporting by Scott Murdoch in Sydney, Makiko Yamazaki and Ritsuko Shimizu in Tokyo, Additional reporting Anisha Sircar in Bengaluru and Summer Zhen in Hong Kong; Editing by Sumeet Chatterjee and Jacqueline Wong
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
