Dario Item
4 months ago

Dario Item
4 months ago

CREDIT SUISSE AT1 BONDS: The Missed Opportunity

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Why Credit Suisse's inaction against FINMA's order of March 19, 2023 harmed investors

CREDIT SUISSE AT1 BONDS: The missed opportunity


A recent article in the Financial Times, titled How UBS’s $3.3bn Credit Suisse deal spawned $9bn of legal claims, shares that Pallas law firm is taking legal action against Credit Suisse (now UBS) for not opposing the write-down of AT1 bonds ordered by FINMA on March 19, 2023.


Specifically, Fiona Huntriss, partner at the Pallas law firm, told the FT:

The reasonable reaction for Credit Suisse – now UBS – would have been to challenge a direction to write down the AT1s. It’s not good enough to say, ‘I was told to do this by my regulator’.

The orders and decisions issued by FINMA on March 19 and 22, 2023, and by Swiss Federal Administrative Court (SFAC) on May 8 and 15, 2023, along with other documents available exclusively on antigua.news, reveal why Credit Suisse had the ability and responsibility to take further action.

On March 19, 2023, the Swiss Financial Market Supervisory Authority (FINMA) instructed Credit Suisse Group AG to write down all Additional Tier 1 (AT1) capital instruments and inform the affected creditors without delay. FINMA declared this order to be immediately enforceable and withdrew the suspensive effect of any appeal against it.


In a letter dated March 20, CSG requested FINMA to confirm that the Contingent Capital Awards (CCAs) were not included in the order made on March 19, 2023. The CCAs were not issued by CSG AG itself but had been granted by other group companies to their respective employees as part of their compensation. CSG also asked for an application to be made to prevent the CCAs from being included in the order or any future orders.


On March 22, 2023, FINMA confirmed its decision to reject CSG’s request for reconsideration which was made on March 20, 2023. FINMA stated that the CCAs were included in the order and lifted the suspensive effect on any appeals against the order.


CSG submitted a request on April 24, 2023, asking the Swiss Federal Administrative Court to either remove the immediate enforceability or withdraw the suspensive effect of the appeal. On April 27, 2023, the SFAC accepted the request to restore the suspensive effect.


In simpler terms, CSG’s efforts to challenge the FINMA order of March 22, 2023, allowed it to avoid the annulment of the CCAs until a final decision of the SFAC.*




Unfortunately, CSG failed to challenge the FINMA decision, issued on March 19, 2023, regarding the write-down of AT1s, which was also immediately enforceable and the suspensive effect of any appeals against it withdrawn. Instead, CSG acted promptly and solicitously in enforcing the decision, wiping out the AT1s and notifying the SIX Swiss Exchange very quickly, causing investors CSG bonds to be removed from their bank deposits overnight. Their AT1s securities thus evaporated in a flash.



CSG’s hasty and condescending actions resulted in negative consequences for the investors who filed their appeals against FINMA order of March 19, 2023. When they requested that the suspensive effect be restored (as made by CSG with its appeal against FINMA order of March 22, 2023), SFAC responded lapidarily that:

“2.3. Vorliegend ist davon auszugehen, dass die CSG AG die angeordnete Abschreibung der streitbetroffenen AT1-Kaptialinstrumente bereits vorgenommen hat, wobei der Vollzug der vorinstanzlichen [FINMA] Anordnung noch vor dem Eingang der vorliegenden Beschwerde erfolgte. Bei dieser Ausgangslage liegt eine qualifizierte zeitliche Dringlichkeit nicht (mehr) vor, da weder erkennbar noch (substantiiert) dargetan worden ist, inwiefern der Verzicht auf die vorgangige Anhorung der ubrigen Verfahrensbeteiligten einen irreparablen Nachteil (noch) verhindern wurde. Es rechtfertigt sich daher, das Interesse der ubrigen Verfahrensbeteiligten, sich vorab zur beantragten Wiederherstellung der aufschiebenden Wirkung zu aussern, gegenuber dem Interesse des Beschwerdefuhrers am sofortigen Erlass der beantragten Massnahme als hoher zu werten. lnfolgedessen ist das Gesuch des Beschwerdefuhrers um superprovisorische Wiederherstellung der aufschiebenden Wirkung abzuweisen.”


“2.3 In the circumstances, it is to be assumed that CSG AG has already executed the ordered write-off of the disputed AT1 capital instruments, with the execution of the order of the lower court [FINMA] having taken place prior to the receipt of the present appeal. In this initial situation, a qualified temporal urgency is not (any longer) present, since it is neither recognizable nor (substantiated) shown to what extent the waiver of the prior hearing of the other parties to the proceedings would (still) prevent an irreparable disadvantage. Therefore, it is justified to consider the interest of the other parties to the proceedings to express themselves in advance on the requested restoration of the suspensive effect as higher than the interest of the appellant in the immediate issuance of the requested measure. Consequently, the appellant’s application for super provisional restoration of the suspensive effect has to be dismissed.”

SFAC stated that the situation had reached a point of no return. In other words, the damage had been done and nothing left to be saved pending the court proceeding.



It should be added that investors found themselves completely abandoned in fighting the FINMA order of March 19, 2023. Unlike Credit Suisse, the investors were also in a much more complicated and uncomfortable situation when they decided to file an appeal against FINMA.

To clarify, in contrast to CSG, the investors did not have any official decision to appeal against. Surprisingly, CSG did not notify the investors of the FINMA decision of March 19, 2023. When they requested a copy of the order from FINMA, they were even more surprisingly informed that they were not entitled to it because they were not part of the proceeding**.

As if that were not enough, FINMA also had the gall to condemn the investors, who dared to impudently request the decision by which their savings were being wiped out, to a CHF 500 judgment fee, on top of the damage, the mockery.



Second, as opposed to CSG, the investors did not have any information and documents that would allow them to understand the evolution of events that led to the AT1s being wiped out.

The only scarce information they had received from the press (as it will be recalled, during the press conference on March 19, 2023, FINMA even failed to mention that it had proceeded with the write-down of CHF 16 billion of AT1s).

There is extensive correspondence between CSG and FINMA of which investors are to this day unaware due to a tactical objection filed by the bank against the investors’ request for access to the files. This objection claims that there is a preeminent interest in keeping documents secret and SFAC has yet to decide on the matter.



After reading the above, one might be tempted to ask whether CSG did not violate good faith and fair dealing ancillary obligations in managing the interests of its AT1s investors, paving the way for contractual and on trust liability. Well, that’s the 16 billion CHF question.

In those frantic moments in mid-March, it was only up to CSG to decide whether to immediately follow up on the March 19 and March 22, 2023 orders or to appeal against them immediately. Just as it was only up to Credit Suisse to decide whether and how to proactively guide and assist investors in attacking FINMA’s order.

It is a fact that when it came to acting pro domo sua, to protect the savings and bonuses of its employees, CSG did not hesitate for a moment to instruct the Homburger Law Firm (one of the most prominent and renowned in Switzerland) to challenge the FINMA order of March 22, 2023, which concerned CCAs.

Instead, when it came to safeguarding the interests of third parties, even if they were the subscribers of the AT1s bonds (i.e. their contractual partners) who had placed their trust in the bank’s fair action, CSG decided not to appeal and to immediately and acritically execute the FINMA order of March 19, 2023 by wiping out the AT1s bonds and burning more than CHF 16 billion of investors’ savings without informing them properly and without allowing them to take corrective action and defend themselves effectively immediately.

On closer inspection, CSG even took a hostile and contradictory attitude, demanding to be admitted as a participant in the proceedings opened with the filing of appeals by investors against FINMA and opposing the disclosure of relevant documents to them.

Many investors missed the deadline to appeal FINMA’s March 19, 2023 order. The remaining investors who appealed promptly were denied suspensive effect.

This ended the tradability of AT1s during the pendency of the trial, effectively frustrating potential business opportunities for investors, who are also facing significant court and lawyer fees to protect their interests.

Again, the Swiss courts, this time the civil ones, will have to answer the thousands of investors who remained damaged.

Ambassador Dario Item


*By submission of May 9, 2023 CSG informed the Swiss Federal Administrative Court that it had decided not to file an appeal against the FINMA order of March 22, 2023.

**This thesis of FINMA has been already defeated by the court.


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