Comparing Tier 1 Hybrids and Tier 2 Notes

Both Tier 1 Hybrids and Tier 2 Notes contain terms necessary to meet APRA’s requirements for Bank capital.

Tier 1 Hybrids and Tier 2 Notes have a number of similarities, but also some important differences. Some of these are summarised below:

 

Tier 1 Hybrids:

Tier 2 Notes:

Protected under the Financial Claims Scheme No No
Term of investment Perpetual, with Mandatory Conversion1 Fixed maturity date, typically around 10 years1
Early return of Investment at the Bank's option Optional Redemption, Optional Resale and Optional Conversion, subject to APRA Approval Optional Redemption, subject to APRA approval

Payments

Franked, periodic distributions on scheduled dates1 Unfranked, periodic interest on scheduled dates1

Conditions to Payment

Payment Restrictions

Solvency Condition

Discretionary Payments:
Bank may decide not to make payments

Yes

No

Cumulative:
Missed payments remain a debt owing to the investor

No

Yes

Tradeable on the ASX

Typically, yes

Typically, yes

Loss absorption features:
Conversion or Write-off

Yes, if a Common Equity Trigger Event or a Non-Viability Trigger Event occurs

Yes, if a Non-Viability Trigger Event occurs

Ranking

Subordinated, rank ahead of Ordinary Shares, but behind Tier 2 Notes and all other claims (If not Converted or Written-Off) Subordinated, rank ahead of Tier 1 Hybrids and Ordinary Shares and all other claims (If not Converted or Written-Off)

1 Subject to conditions

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