Compare key features
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 | Tier 1 Hybrids: No |
Tier 2 Notes: No |
| Term of investment | Tier 1 Hybrids: Perpetual, with Mandatory Conversion
|
Tier 2 Notes: Fixed maturity date, typically around 10 years
|
| Early return of Investment at the Bank's option | Tier 1 Hybrids: Optional Redemption, Optional Resale and Optional Conversion, subject to APRA Approval |
Tier 2 Notes: Optional Redemption, Optional Resale and Optional Conversion, subject to APRA Approval |
| Payments | Tier 1 Hybrids: Frankable, periodic distributions on scheduled dates
|
Tier 2 Notes: Unfranked, periodic interest on scheduled dates
|
| Conditions to Payment | Tier 1 Hybrids: Payment Restrictions |
Tier 2 Notes: Solvency Condition |
| Discretionary Payments: Bank may decide not to make payments |
Tier 1 Hybrids: Yes |
Tier 2 Notes: No |
| Cumulative: Missed payments remain a debt owing to the investor |
Tier 1 Hybrids: No |
Tier 2 Notes: Yes |
| Tradeable on the ASX | Tier 1 Hybrids: Typically, yes |
Tier 2 Notes: Typically, yes |
| Loss absorption features: Conversion or Write-off |
Tier 1 Hybrids: Yes, if a Common Equity Trigger Event or a Non-Viability Trigger Event occurs |
Tier 2 Notes: Yes, if a Non-Viability Trigger Event occurs |
| Ranking | Tier 1 Hybrids: Subordinated, rank ahead of Ordinary Shares, but behind Tier 2 Notes and all other claims (if not Converted or Written-Off). If Written-Off, investors will have no claim on the Bank (even though Ordinary Shares may still be on issue) and Tier 1 Hybrid investors are likely to be worse off than holders of Ordinary Shares. |
Tier 2 Notes: Subordinated, rank ahead of Tier 1 Hybrids and Ordinary Shares but behind all other claims (if not Converted or Written-Off). If Written-Off, investors will have no claim on the Bank (even though Ordinary Shares may still be on issue) and Tier 2 Notes investors are likely to be worse off than holders of Ordinary Shares. |
Hybrid Securities Education
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