MAS‘ Statement on Additional Tier 1 Instruments Issued by Singapore Banks

In view of additional Tier 1 instruments issued by Singapore banks, the Monetary Authority of Singapore (MAS) has issued a press statement. Therein, the Authority informs of the order in which shareholders and creditors would bear losses in a resolution or liquidation scenario.
Thereafter, creditors would be the first aspirants to funds from resolution. Any non-recovered differences in relation to funds they would have received, if an institutions was to be liquidated would be compensated by the resolution fund, which is funded by all financial institutions in Singapore. Furthermore, equity holders would be last in line, after holders of additional Tier 1 (AT1) and Tier 2 capital instruments. That means that equity holders are likely to have to absorb most losses from such scenarios. However, MAS can deviate from this order, if it finds this necessary to „maximise the value of the FI [Financial Institution] for the benefit of all creditors as a whole“.
MAS further notes that additional Tier 1 bonds such as CoCos (Contingent Convertible Bonds) are only available to institutional and accredited investors with minimum investments and denominations of S$200,000. Issuers must ensure to provide proper disclosures to their institutional and accredited clients, including information on key risks. Investors, on the other hand, need to ensure to understand all risks involved when investing in such bonds.