Bank : 2017 is starting on a brighter note

Friday 13 January 2017 - - - - - - The years go by and nothing stays the same. After being hit from January 2016 by concerns about the integration of the Pillar 2 in the MDA, followed by the calculation of Deutsche Bank’s ADI, the AT1 market is starting 2017 on a brighter note. - The volume of AT1 issues last year (around € 24bn) may be surpassed as some banks still have programmes to wrap up and others are due to launch inaugural issues. - > - This turnaround, reflected in the performance of these instruments in recent weeks, is due, among other things, to regulatory clarifications. - The European Commission’s proposals in November 2016 confirmed the split of the Pillar 2 and the credit hierarchy for coupon payments. As such, the principal risk on these bonds – the non-payment of coupons – has diminished for many banks. - - Beyond this principal risk and that of conversion/impairment, already largely priced in by investors, it will also be necessary to identify the risk of extension and of redemption at par before the first call date (Tax Call /Reg Call). - - You will find below an overview of the potential risks in this market, concluding with our recommendations.