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# Miriam Mukuru

## Dutch Finance Department Calls for Re-evaluation of Risky AT1 Bonds

The Dutch finance department has recently urged a re-evaluation of risky Additional Tier 1 (AT1) bonds issued by banks, emphasizing the need for increased transparency in the process.

“A reassessment of the complexity, transparency, and regulatory qualifications of AT1 instruments may be necessary,” stated the Dutch Ministry of Finance in a report released on Monday. This call for re-evaluation comes in light of the evolving financial landscape and the importance of maintaining adequate safety buffers in the banking sector.

AT1 bonds, which were introduced post the global financial crisis, serve as a form of risky debt that can act as a safety net for banks facing financial distress. However, concerns have been raised regarding the transparency and clarity of some instruments qualifying as AT1 capital, leading to questions about their effectiveness as actual capital.

The spotlight on AT1 bonds intensified when Credit Suisse wiped out all outstanding AT1 bonds as part of its acquisition by UBS Group in March 2023, further highlighting the complexities surrounding these financial instruments.

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Puja Karia from Fitch’s credit research arm CreditSights mentioned that the report from the Dutch Ministry of Finance might not lead to immediate regulatory changes due to the oversight of Dutch banks by the European Central Bank and the Dutch National Bank. Despite this, the concerns raised are essential for ensuring the stability and transparency of the financial sector in the long run.

Credit spreads on Dutch banks like ABN AMRO, ING, and Rabobank are not expected to be significantly impacted by the report, as the raised concerns are unlikely to materialize in the short to medium term, according to Karia’s assessment.

For more insights and analysis on the legal and regulatory implications of the Dutch finance department’s call for re-evaluation of AT1 bonds, reach out to Miriam Mukuru at [email protected].

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*END* Dow Jones Newswires
March 20, 2024 11:39 ET (15:39 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.

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