Quote Originally Posted by GTM 3442 View Post
As I understand it, back in the day the government guarantee as applied to South Canterbury Finance covered the plain vanilla Bonds but not the Perpetual Preference Shares.

This may set a precedent in the minds of those designing the current arrangement.
Quite a different scenario. Under the NZ Regs, the AT1 can only be touched if the bank has been effectively shuttered by the regulators. Quite unlikely in the case of our Big 4 banks which are much better regulated now, and i assume would benefit from unlimited liquidity support from the RBNZ in case of stress, as they have done in the not so distant past.

Bank sub debt and preferred stock are great investments in NZ. A lot of the positive economics of banks have been shifted from equity holders to bond holders with the current capital requirements and implied lower leverage.