SG banks strong and stable despite uncertain AT-1 issuance market - experts

Singapore banks may face higher funding costs as lenders could demand higher risk premiums on AT-1 papers.

Singapore banks have a stronger resilience compared to their Asian counterparts, so experts say. But just how strong they are and how easily they adapt to global banking crises are occasionally put to the test.

The zero write-off of Credit Suisse's Additional Tier-1 (AT-1) bonds presented concerns over the impact of AT-1 bond losses on global banks. Although Asian banks are less likely to be dramatically affected, it pays to see how and why Singapore banks stand in the wind.

Credit Suisse’s AT1 write-down 

AT-1 bonds are a type of hybrid debt that can be converted into equity if a predetermined event occurs, acting as an additional capital and buffer for banks. That’s why Credit Suisse’s $17b-writedown of AT-1 notes early this year caused such a stir in the industry.

The “Lion City” has been marked to have a lesser chance of following in the footsteps of the AT-1 writedown of the Swiss bank, according to Gary Ng, senior economist at Natixis Corporate & Investment Banking.