FINMA banned Credit Suisse from repaying AT1s, Sonntagszeitung reveals

In yesterday’s edition of the Swiss weekly Sonntagszeitung, it was revealed that Credit Suisse had requested to repay some of its AT1 bonds two days before the press conference made on March 19, 2023. However, the Swiss Financial Market Regulatory Authority (FINMA) rejected this request. As we know, on March 19, 2023, the Swiss government, FINMA and the Swiss National Bank announced the (forced) merger of UBS and Credit Suisse to address the issues of Switzerland’s second largest bank.

Just a few days prior on March 15, 2023, Ammar Al Khudairy of the Saudi National Bank (SNB) stated that the SNB would not inject more money into the Credit Suisse than the 9 percent of share capital it already held. This careless statement caused the share price of Credit Suisse to plummet, as well as the value of AT1 bonds to drop by half. The following day, on March 16, the Swiss National Bank and FINMA immediately stated that Credit Suisse still met liquidity and capital requirements and granted a CHF 50 billion cash loan. Credit Suisse then announced its intention to use part of the loan to repay some AT1 bonds and published a list of the bonds that would be subject to repayment.

What was not known until yesterday is that on March 17, 2023, Credit Suisse submitted a formal request to FINMA to be allowed to repay part of the AT1s, but FINMA surprisingly rejected the request. Credit Suisse had intended to immediately announce this move publicly to restore market confidence, but FINMA’s rejection prevented them from doing so and led to deposit outflows.

According to the Sonntagszeitung, this suggests that the UBS-CS merger was already a done deal and that AT1 holders were expected to sacrifice their money for the benefit of UBS shareholders, who would receive a fat special profit from the bond write-down.

Furthermore, this situation highlights that the Credit Suisse did not consider the loan granted by the Swiss National Bank to be a viable event that would result in the write-down of the AT1 bonds, as outlined in the issuance prospectus (as previously revealed by antigua.news on May 15, 2023)

This bombshell revelation by the Sonntagszeitung has given added punch to the claims of the more than 3,000 plaintiffs who have filed an appeal with the Swiss Federal Administrative Court (to which are added the appeals of the many employees who have risen against the write-down of the CCAs).

Most importantly, the recent revelation emphasizes the urgency of accessing FINMA’s files, which CS (now UBS) is attempting to block with a questionable (and desperate) judicial request. The Swiss Federal Administrative Court has not yet made a decision on this matter. To maintain Switzerland’s transparency and credibility as a state governed by rule of law, and to regain the trust of foreign investors, it is imperative that all information regarding the feverish events of March be disclosed to the plaintiffs-investors. This should occur regardless of the ongoing work of the Parliamentary Commission of Inquiry, which was established by a majority decision of the Swiss Parliament in June.