A capital instrument that represents a bank’s or financial institution’s own issued shares (common stock, or class A shares and preferred stock, or class B shares). Paid-up capital instruments are issued to raise paid-up capital (the amount of money paid by shareholders in exchange for shares of stock).
Paid-up capital instruments, and any share premium account associated with these instruments, also form the so-called additional tier-1 capital (AT1). 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.
