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

Important information