Swiss regulator FINMA ordered $17bn of Credit Suisse's AT1 debt to be written down to zero, while shareholders received some compensation.
Why it matters
The decision has rattled the $275bn AT1 bond market, prompting a sharp fall in prices. AT1 bonds are the riskiest type of debt banks can issue, ranking immediately after equity in the event of losses. The decision inverted the long-established seniority of bondholders over shareholders over the assets of a company in distress. These higher-yielding junior bonds emerged from the 2008-2009 crisis as a way to boost bank capital while shifting the risk of losses to investors and away from taxpayers.
What the papers say
All sources report on the same event, with some providing additional context and analysis.
How we got here
AT1 bonds are part of bank capital buffers that insulate taxpayers from funding bailouts. The $275bn global market for AT1 bonds was rocked by the Swiss authorities' decision on March 19 to write down $17bn of Credit Suisse securities. The decision has hurt AT1 bonds issued by other European banks and they came under fresh selling pressure. The decision has also made it difficult for Asian lenders to replenish their capital by issuing AT1 bonds.
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Credit Suisse Group AG is a global wealth manager, investment bank and financial services company founded and based in Switzerland.
Switzerland, officially the Swiss Confederation, is a country situated in the confluence of Western, Central, and Southern Europe. It is a federal republic composed of 26 cantons, with federal authorities based in Bern.
UBS Group AG is a Swiss multinational investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres as the largest Swiss banking
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