Capital
Additional Tier 1 Capital
Also known as AT1
Additional Tier 1 (AT1) capital consists of perpetual non-cumulative preferred stock and certain hybrid instruments that absorb losses on a going-concern basis but rank junior to equity in distribution. AT1 sits between CET1 and Tier 2 in the capital stack.
Formula
AT1 instruments must be perpetual (no fixed maturity), have non-cumulative discretionary distributions, and contain a loss-absorption trigger — either principal write-down or conversion to common equity when CET1 falls below a predefined level. Dividends are payable from retained earnings only.
Why it matters
AT1 is the cheapest form of going-concern capital — the bank can stop paying dividends without triggering default. The 2023 Credit Suisse resolution wiped out $17B of AT1 ahead of equity, which roiled the global AT1 market and spotlighted the rarely-tested loss-absorption mechanism.
How to interpret
US bank AT1 is mostly perpetual non-cumulative preferred stock. A high AT1 share of Tier 1 (>15%) signals heavy reliance on preferred-stock markets; near-zero AT1 (common at community banks) signals a pure-equity Tier 1 stack.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 20% of Tier 1 | Heavy | Large preferred-stock issuance. |
| 5–20% | Moderate | Typical large-bank capital stack. |
| < 5% | Light | Predominantly common-equity Tier 1. |
Worked example
Frequently asked
How does AT1 differ from CET1?
CET1 is common shares + retained earnings — the bank's most loss-absorbing capital. AT1 is junior preferred stock or hybrids that absorb losses only via discretionary dividend skip or contractual write-down.
Why did the Credit Suisse AT1 wipe-out matter?
Swiss regulators wrote AT1 down to zero while leaving some equity recovery, reversing the conventional creditor hierarchy. The market priced AT1 risk much higher afterward, raising AT1 issuance costs globally.
Do US AT1 instruments work the same way?
Most US AT1 is dividend-deferral perpetual preferred stock — the loss-absorption mechanism is dividend suspension rather than principal write-down. Write-down/conversion AT1 (CoCos) is more common in Europe than the US.
Sources
- 12 CFR §217.20(c) — Federal Reserve AT1 capital definition
- FFIEC Call Report Schedule RC-R Part I
See AT1 across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by AT1, refreshed quarterly within 48 hours of FFIEC release.