European Banks: Uncertain Future For AT1s
Simon Adamson - Head of Financials, CreditSights
Paola Biraschi - Head of Southern European Banks, CreditSights
Puja Karia - Head of Western European Banks, CreditSights
Jennifer Ray - Head of Northern European Banks, CreditSights
Feargus Haston - Analyst, Banks, CreditSights
8 December 2025
Insights into European Banks AT1s Regulatory Reform:
- ECB Task Force Proposals Expected December 11: Consequently, the High-Level Task Force will present simplification proposals focusing on capital structure and buffer reforms.
- AT1 Phase-Out Remains Unlikely Near-Term: Despite regulatory skepticism, achieving consensus for phasing out the €220bn AT1 market proves extremely challenging.
- Multiple Regulators Question AT1 Effectiveness: Indeed, authorities including Bundesbank, Dutch Finance Ministry, and FSI have expressed concerns about AT1 complexity.
- Buffer Simplification More Probable Than AT1 Reform: Therefore, combining capital buffers like CCyB and SyRB appears more feasible than fundamental AT1 restructuring.
- Long Grandfathering Period Would Support Investors: Moreover, any eventual phase-out would likely guarantee AT1 redemptions at first call dates through 2035.
Executive Summary
Following APRA’s phase-out of Australian bank AT1s, European regulators have initiated discussions about similar measures. Additionally, Credit Suisse’s failure has intensified regulatory scrutiny of AT1 instruments across European banking systems.
Meanwhile, the ECB Task Force on Simplification prepares to deliver its findings on December 11. Subsequently, market participants anticipate potential guidance regarding AT1 capital’s role within European bank frameworks.
However, proposals to modify certain AT1 features remain under consideration among European regulatory authorities. Nevertheless, achieving broad consensus for comprehensive reforms presents significant challenges across multiple jurisdictions.
Furthermore, any announced phase-out would likely incorporate extended transition periods for existing AT1 instruments. Consequently, outstanding securities might maintain scheduled redemption options at their designated first call dates.
Therefore, regulatory simplification efforts will probably prioritize streamlining capital buffer requirements within banking systems. Ultimately, focus centers on reducing overall complexity in existing capital requirement frameworks.
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