March may have been the cruelest month for financial firms, but April is showing the tenderest shoots of growth emerging. The collapse of Credit Suisse Group AG on March 19 into the arms of UBS Group AG resulted in $17 billion of the riskiest junior debt being wiped out, effectively closing the market. But insurance companies are cautiously reopening the market for new subordinated debt, paving the way for banks to eventually follow.

The writedown to zero delivered a seismic shock to the bank capital market, despite there being clear provisions in the prospectus. Mitsubishi UFJ Financial Group’s Inc.’s private clients lost more than $700 million on Credit Suisse’s riskiest bonds, Bloomberg News reported, underlining the global impact. Average yields in Europe’s secondary market are still around 11%, too expensive for most banks even if investor demand could be found.

Greed will inevitably overcome fear, though it might take a pause in central banks’ interest-rate hiking cycle to focus fund managers’ minds on what’s an acceptable yield to compensate for the risk of owning bonds that regulators might make worthless in the event of a bank collapse.

Banks are generally much better capitalized over the past decade, so most have sufficient breathing room before needing to raise new equity-related debt. But the regulatory requirement to have sufficient debt cover at all levels of the capital stack hasn’t gone away. That very much includes securities with risk of being bailed in, as that’s the base that supports the whole bank regulatory structure. The AT1 market must move on eventually — and the regulators will be keen for it to do so as an extended hiatus renders the system dysfunctional.