AT1 = Additional Tier 1 Capital

It refers to a type of contingent convertible bond (CoCo bond) that banks issue to strengthen their capital base under regulatory requirements.

- AT1 bonds are part of a bank's regulatory capital under Basel III rules.
- They act as a buffer to absorb losses in times of financial stress, helping maintain stability.
- They typically pay high yields but come with risks, such as being written down or converted into equity if bank’s capital ratio falls below a threshold.
- These bonds are perpetual, though issuers often have the option to call them after a few years.