[chartist kao]

Perpetual bonds are a type of debt instrument that do not have a maturity date, meaning they can be held by investors indefinitely. Banks and other financial companies often issue perpetual bonds to raise Additional Tier 1 (AT1) capital, which is a type of capital that can absorb losses in the event of financial distress.

Perpetual bonds are considered AT1 capital because they have features that make them more like equity than traditional debt. For example, many perpetual bonds have provisions that allow them to be converted into equity if certain conditions are met, such as the bank's capital ratio falling below a certain level.

Additionally, perpetual bonds may also have write-down provisions that allow the bond's principal to be reduced in the event of financial distress. This means that if a bank's capital ratio falls below a certain level, the bank can use the write-down provision to reduce the value of the perpetual bond, effectively turning it into equity and increasing the bank's capital base.

By using perpetual bonds to raise AT1 capital, banks and other financial companies are able to strengthen their balance sheets and improve their resilience to financial shocks. This can help to minimize systemic risk and protect the broader financial system from potential contagion in the event of a bank failure.