Investors who earned easy money with high-risk bonds invented after the financial crisis are being forced to accept that the rules have changed: they may not get paid.

Banks typically sold these perpetual bonds - known as AT1 bonds - with five years before an option to repay was triggered. In the past, investors got their money back, and banks replaced the bonds with new ones, but some are changing tack.

The trend highlights the vulnerability of global finance as it grapples with rocketing borrowing costs and the impact of war in Ukraine.

Earlier this year, Credit Suisse's near collapse prompted a Swiss government-backed rescue that wiped out billions of dollars of AT1 bonds, stunning investors and pushing up the cost for other banks wanting to sell their own.

Now some smaller banks are no longer repaying the bonds - in an unwelcome development for investors - opting instead to keep them open-ended beyond five years and paying interest on them instead.

Austria's Raiffeisen Bank International (RBI) is set to skip again an option to repay its 650 million euro ($716 million) AT1 bond in the middle of June.

"RBI is committed to calling and refinancing at the earliest possible date, provide the economics make sense," an RBI spokesperson told Reuters.

That follows two German banks, Deutsche Pfandbriefbank and Aareal Bank, which also swerved milestone dates to repay 300 million euro bonds apiece earlier this year, electing instead to keep them open.

The banks' actions show how the wipeout of billions of dollars of Credit Suisse AT1 bonds still reverberates around this market, which is estimated at roughly $275 billion.

Investors, caught off guard, are now more wary of investing in such bonds from mid-sized bank issuers.

Yields on the bonds have surged to more than 10% from around 8% before the Credit Suisse's rescue as investors seek a higher premium for the risk.

"The AT1 market is splitting," said Alessandro Cameroni, a portfolio manager at asset manager Lemanik.

"Wary of the stigma attached to not calling (repaying), big banks will act accordingly. But for smaller issuers, that would also like to reimburse investors ... it is now increasingly difficult."

COSTLY SPLIT

Peter Harvey, a fund manager at Schroders, said the stress had split the market between big strong banks and smaller institutions.

"With smaller, weaker banks I think you'll see more extensions, which is obviously going to annoy people," he said, referring to investors.

Investors in RBI's bond no longer expect to be repaid in the middle of June because the bank missed a deadline two weeks ago to publicly announce that it would repay, two investors in the bond said.

RBI, which has come under U.S. scrutiny over its large business in Russia, said the higher cost of issuing a new bond played a role in its decision.

SHOCK ABSORBER

The AT1 bonds were designed to help banks absorb losses, and they count towards their capital buffers. But investor appetite for the bonds is waning.

AT1 bond prices sank to three-year lows during the recent banking turmoil, according to Invesco ETF, which tracks the market.

The prices in the multi-billion-dollar AT1 market show that investors only expect one tenth of bonds to be repaid as usual, according to investment manager Federated Hermes.

Some big banks, including Italy's UniCredit and Britain's Lloyds, have repaid their bonds.

But more repayment milestones beckon. In the next 12 months, Societe Generale faces calls on $3 billion of debt, UBS on $2.5 billion and Santander on $2.3 billion, based on the banks' statements.

The situation poses a conundrum for banks which need to borrow or refinance.

Morgan Stanley analysts reckon that European banks need to issue more than 400 billion euros of AT1 debt over the next three years.

The current high cost will deter some.

"The alternative," said Karsten Junius, chief economist at J. Safra Sarasin, "would be increasing their equity and that would be even more costly."

($1 = 0.9084 euros)

(Reporting by Chiara Elisei and Carlo Giovanni Boffa, editing by Jane Merriman)