European banks are increasingly using Additional Tier 1 (AT1) capital to meet regulatory requirements, research from the National Bank of Denmark shows.

The study says that large banks with diverse business models and banks with higher credit ratings hold more AT1 capital. However, the authors – Stine Louise von Rüden and Ianna Yordanova – add that the relationship between a bank’s credit rating and its capital structure is not necessarily straightforward.

Under the Basel capital requirements, AT1