(News Bulletin 247) – The Swiss Financial Market Supervisory Authority (FINMA) assured Thursday that it had complied with the law by carrying out the complete amortization of Credit Suisse’s ‘AT1’ debt instruments.
As part of the merger between UBS and Credit Suisse, the Swiss regulator had asked Credit Suisse to fully amortize these instruments, that is to say to reduce their nominal value to zero, a decision which caused a stir in beginning of the week.
Investors believe that FINMA has thus ignored the hierarchy of creditors by fully amortizing the banking group’s most junior debt.
“The holders of these debts could see 17 billion dollars reduced to nothing, whereas they are normally senior to the actions and should have been saved in first”, recall the teams of IG France.
FINMA stresses, however, that these securities provide contractually to be fully amortized in the event of the occurrence of certain triggering events, in particular in the event of the granting of exceptional public aid.
Beyond these contractual bases, the authorized Swiss says it has also relied on an emergency ordinance surrounding the granting of liquidity from the Swiss National Bank (SNB) to systemically important banks.
“On Sunday, a solution was found to protect customers, the financial center and the markets,” said Urban Angehrn, director of FINMA.
‘In this context, it is important that Credit Suisse’s banking activities continue to operate without interruption and without problems. This is now the case,’ he concludes.
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