A capital instrument that is subject to specific terms and conditions for eligibility as part of tier 1 capital (AT1 capital) base of the issuing bank. With AT1 instruments (AT1 capital instruments), a bank can absorb losses on a going-concern basis, although these instruments do not meet all the criteria for common equity tier-1 capital (CET1). AT1 consists of instruments that are originally not common equity but can be made part of this tier on an eligibility basis (i.e., subject to an eligibility test).

AT1 capital instruments are paid-up capital instruments and any share premium account associated with these instruments. These instruments are usually issued as hybrid debt instruments (contingent convertibles, CoCo), which can be written down or converted to CET1 instruments subject to a prespecified trigger event (as in the case the CET1 capital ratio falls below a minimum level  or increases beyond a maximum level (e.g., 5.125%). By nature, AT1 instruments must not involve any terms or features that could prevent the recapitalization of an entity in the case of a trigger event.

Examples of AT1 capital instruments include a contingent convertible or a hybrid security, with a perpetual term (characteristics of equity) and can be converted into equity upon occurrence of a trigger event.