Prior to holders of comparable securities losing everything in last month’s Credit Suisse bailout, STANDARD Chartered redeemed a $1 billion so-called extra tier one (AT1) bond.
The bank with a concentration on Asia and Africa exercised its option to redeem the securities on April 2, according to information provided in a stock exchange filing on Monday (Apr 3). The firm had previously signaled its intention prior to the recent upheaval in the banking sector.
The Swiss regulators’ decision to write down US$17 billion of Credit Suisse securities on March 19 shook the US$275 billion global market for AT1 bonds, which are a component of bank capital buffers that protect taxpayers from supporting bailouts.
The price of AT1 bonds has since fallen to a record low due to jitters regarding their value.
Analysts have stated that banks normally call AT1 bonds at the earliest chance, thus StanChart’s choice to do so could offer some comfort.
According to economists, issuing new AT1 debt could be exceedingly expensive for banks until the market regains more confidence.
If a replacement AT1 bond would be issued, StanChart did not indicate this in its filing, and the bank did not immediately respond to a request for comment.
Bill Winters, the CEO of the bank, stated last month at a financial symposium in Hong Kong that the Swiss decision to eliminate AT1s, made as part of competitor UBS’s emergency bailout of Credit Suisse, will have broader ramifications for industry regulation and how banks operate.
On March 24, when trading at 88 cents on the dollar, additional AT1 debt issued by Standard Chartered reached a record low, mirroring the performance of a sizable portion of the AT1 market and signaling broader market stress. Around the beginning of March, the notes were selling for as much as 103 cents on the dollar.
