Skip to main content

Featured post

Is true democracy exist around the world?

Additional Tier-1 (AT-1) Bonds



 Additional Tier-1 (AT-1) bonds are essentially unsecured and perpetual bonds. They are perpetual bonds because they do not have a maturity date and it is unsecured because it is not backed by any collateral, unlike secured bonds. And if a bank goes through a crisis, then it is not obligated to pay back those who have invested in these bonds. So, there is no doubt that the Additional Tier-1 bonds carry a high risk for the investor, but it also guarantees higher yields or higher returns. Now, the question is who issues these bonds. These AT-1 bonds are issued by commercial banks to increase their capital base as mandated by the Basel-3 norms. See the Base-3 norm regular literary norms are a part of the Basel Accords, which have been worked out by the Basel Committee on Banking Supervision. The Basel Accords provides for a global regulatory framework for banks. And the Basel-3 norms were established in 2010 after the financial crisis of 2008 2009. See under the Basel Accords, banks are mandated to maintain adequate capital to deal with stress and ensure that they have sufficient liquidity to deal with the crisis. But the financial crisis made the basal committee realize that the capital adequacy requirements mandated by the Basel-1 norms and Basel-2 norms were insufficient. And hence, the Basel-3  norms were established in 2010. As per these Basel-3 norms, banks are required to maintain a permanent capital before they start receiving deposits or before they start giving out loans. Basically, banks are not supposed to touch them. Permanent capital for their day to day operations and these regulatory norms have to be enforced on the banks by the respective central banks. So, accordingly, the RBI has mandated Indian banks to maintain a permanent capital of 11.5%  of their risk-weighted loans out of this mandated minimum capital 9% of it should be maintained as core capital or Tier-1 capital. And out of this core capital, 5.5% of it should be maintained in equity. So, to supplement their core capital, as mandated by the RBI and the Basel-3  norms, banks issue a type of bond known as the AT-1 bond or the Additional Tier-1 bonds, mutual funds, pension funds, other investors and even individuals can invest in these Additional Tier-1 bonds and this helps the bank to maintain its permanent capital. This topic is news because those who had invested in the AT-1 bonds have yes bank. They are at the risk of losing their money.

Comments

Popular posts from this blog

How lockdown having a disproportionate impact on women

A disaster or catastrophic ends to have a disproportionate impact on women. According to the writer, this is because of the traditional gender-based role of women in society. For example, during the 2004 Indian Ocean tsunami, it was observed that the disaster had a disproportionate impact on women, mainly because of their gender-defined roles. Since women are generally seen as the traditional caregiver in the family, they lacked the required life-saving skills, and as a result, a relatively higher number of deaths count was registered amongst women during the tsunami. Then after the disaster, women who were rendered homeless were accommodated in relief camps. And it was observed that at these relief camps, women had to face abuse and molestation, and they even had to face hygiene and sanitation issues at these relief camps. similar challenges have been faced by women in the United States as well, which is frequently hit by tornadoes. similar challenges were noted during the 2018 19 f…

Are humans responsible for the COVID-19 pandemic

Humans responsible for the pandemic According to the UNDP. The spread of a zoonotic disease such as COVID-19 can be directly attributed to the overexploitation of biodiversity and ecosystems by human beings. The UNDP has said that several zoonotic diseases have affected human beings because of increased contact of humans with animals. Especially wild animals. So these diseases with a jump from animals to human beings are referred to as zoonotic diseases or zoonosis. And it is a direct outcome of the overexploitation of biodiversity and ecosystems through human activities. The UNDP report even says that it is not just COVID-19 but even tuberculosis, rabies, malaria, toxoplasmosis h1 none SARS, burst, Ebola Zika, etc. They are all examples of zoonosis that have jumped from animals to human beings. And in each case, the source can be attributed to the destruction of the environment and biodiversity through human activities
It is found that the coronavirus outbreak certainly comes from t…

Researchers found new symptoms of COVID19

Many COVID-19 cases have emerged from Europe and the United States, where many patients have reported a complete inability to smell or even to taste. So, this has given rise to questions, whether the SARS coronavirus is affecting our neurons that are responsible for smell and taste, or is it affecting other cells, which are involved in this olfactory function. A recent study conducted in India has shown that it is not the neurons that are being affected by the virus, but instead, it is a set of cells present in the upper regions of our nasal cavity that are being affected by the double Coronavirus. These cells include the sub Technicolor cells and the horizontal basal cells. But importantly, these cells are not directly involved in helping us smell. It means that these cells are not directly involved in the olfactory function. But these cells help us nourish and support the other cells, which are actually involved in the olfactory function. So this means that the novel Coronavirus is…