Financial markets were stunned on 19 March 2023 by the write-down of Credit Suisse Group AG’s US$17 billion of AT1s, seemingly effected to deliver UBS’s takeover of Credit Suisse.
Whilst the markets have ultimately shown little contagion risk outside of these instruments (so far), the shock waves are still reverberating for holders of these AT1s, and fundamental unanswered questions as to how and why the equity remained largely intact yet the AT1s were written off, seemingly outside of their terms and outside of the bank resolution regime which, amongst other things, preserves the claims hierarchy and the ‘no creditor worse off’ principle.
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