ECB Floats Tweaking AT1 Bank Capital to Better Absorb Losses (1)

The European Central Bank proposed changing the design of a type of deeply subordinated bond issued by lenders to ensure it can absorb losses before banks fail.

Enhancing the features of additional Tier 1 capital would also provide extra clarity to lenders and investors and would be compliant with international standards, the ECB said Thursday in a statement.

The proposal is about making the bonds “closer to equity,” ECB Vice President Luis de Guindos told reporters.

While saying that European co-legislators have to decide on which terms should be changed, Guindos said “it’s not only the coupon, there are other ...