Riskier than Equity - Case Study of AT1 Write-Down of Yes Bank Limited

13 Pages Posted: 21 Apr 2022 Last revised: 23 Apr 2022

See all articles by Manick Wadhwa

Manick Wadhwa

SKI Capital Services Ltd.; Indian Institute of Technology (IIT), Delhi - Department of Management Studies; University of Delhi - Faculty of Law

Anivesh Bharadwaj

International Criminal Court; University of Amsterdam; Columbia Law School

Date Written: April 19, 2022

Abstract

Owing to its deteriorating financial position, Yes Bank, one of India’s largest private banks, wrote down INR 8,415 crore worth of its Additional Tier 1 (“AT1”) Bonds in March 2020. Basel III compliant AT1 Bonds have regularly been issued by Banks in India. These bonds act as buffers for banks in times of stress and are perceived to be safer than equity shares of a bank. The write-down of Yes Bank’s AT1, however, was done without first writing-down of the common equity of the Bank, which held an inferior position to the AT 1 Bonds.

In this paper, we critically examine the legal provisions and implications relating to the write-down of AT1 Bonds in India and whether the write-down in the case of Yes Bank was in accordance with the public policy and the terms of the contract entered with the Bondholders. Two years on, with the Yes Bank case study we also attempt to examine the role and impact of RBI in creating security riskier than common equity.

Keywords: Yes Bank, Additional Tier 1, Basel III, RBI, Write down, bondholder, Banking Regulation Act, 1949, Ministry of Finance, Debentures, Economics

JEL Classification: E5

Suggested Citation

Wadhwa, Manick and Bharadwaj, Anivesh, Riskier than Equity - Case Study of AT1 Write-Down of Yes Bank Limited (April 19, 2022). Available at SSRN: https://ssrn.com/abstract=4087180 or http://dx.doi.org/10.2139/ssrn.4087180

Manick Wadhwa (Contact Author)

SKI Capital Services Ltd. ( email )

New Delhi, 110005
India

HOME PAGE: http://skicapital.net

Indian Institute of Technology (IIT), Delhi - Department of Management Studies ( email )

Hauz Khus
New Delhi, 110016
India

University of Delhi - Faculty of Law ( email )

New Delhi
India

Anivesh Bharadwaj

International Criminal Court ( email )

The Hague
Netherlands

University of Amsterdam ( email )

Amsterdam, 1018 WB
Netherlands

Columbia Law School ( email )

435 West 116th St
NEW YORK, NY 10027

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
339
Abstract Views
1,086
Rank
171,757
PlumX Metrics