Credit Suisse AT1s CASE: The Unspoken Things — Ambassador Dario Item

Dario Item
13 min readOct 8, 2023


By Dr. Dario Item*

It is widely acknowledged that Credit Suisse has experienced several difficulties in recent times.

Since October 2022, there has been a growing lack of trust in the financial institution. However, this has not resulted in a shortage of funds or a capital deficit.

The Swiss bank announced restructuring plans in October 2022 in response to a scandal involving the Archegos fund that cost it $5 bn. To help with its recovery, it decided to increase its share capital by $4bn, with $1.5bn being contributed by the Saudi National Bank. As a result, the Saudi National Bank held a 9.9% share of CS’s capital.

These difficulties, on the other hand, put continuous pressure on the value of CSG’s shares.

Credit Suisse faced a setback on Thursday, March 9, 2023, when it suddenly had to postpone its annual report’s release, which was scheduled for the following week. This was due allegedly to unresolved comments and questions from the U.S. Securities and Exchange Commission (SEC) regarding the accuracy of the annual financial statements.

During that week, a series of bank failures occurred in the United States, including the collapse of Silicon Valley Bank and Signature Bank. On March 10, 2023, authorities shut down Silicon Valley Bank, followed two days later by Signature Bank.

As early as the opening of the markets on Monday, March 13, 2023, CSG’s stock price and AT1s would experience significant shocks. The Swiss Federal Council would later reveal that the outflow of deposits was particularly pronounced in the very week of March 13, 2023.

However, during an interview with Bloomberg on March 14, Ulrich Körner, the CEO of CSG, stated that Credit Suisse had received a good inflow of client funds on Monday, March 13. He also mentioned that the liquidity situation had improved since the end of 2022, with the liquidity coverage ratio rising from 144 to 150. On the same day, on Tuesday, March 14, CSG’s stock price stabilized.

On the same March 14, 2023, CSG created a “Fixed Income Investor Presentation“.

The presentation was published on its website:

On page 11 of the presentation, a slide named “Swiss bail-in regime: build-up of HoldCo debt layer reduces loss given default and supports credit rating“ described the “Bail-in hierarchy in Switzerland“.

In that hierarchy highlighted by Credit Suisse, it was indicated that in the case of a “point of non-viability” the “Loss absorption waterfall” provides for equity capital to respond in the first instance, and only secondarily would AT1 and AT2 be called upon. This is at least the first impression any investor would get. In the same document, however, there is the classic fine print, written in small font and in a hazy color and with a very ambiguous meaning: “insofar as not converted/written-off, prior to restructuring based on terms.“. Just to cover their backs without diverting attention from the primary goal of reassuring investors, who only today, perhaps and too late, could be able to grasp the exact meaning of that note.

A few days after the March 19, 2023 press conference, the link to the presentation would be mysteriously removed.

It is certainly peculiar, however, that in an earlier presentation, published in 2016, and titled “Credit Suisse Debt Investor Presentation” page 28, depicts the same “Bail-in hierarchy in Switzerland” as found in the presentation of March 14, 2023, albeit, at that time, without mentioning any fine print.

It is legitimate to wonder if the market practice was to attract investors by claiming that AT1s were a safer instrument than equity, only to change strategy at the eleventh hour, but without attracting too much attention, perhaps at the behest of some authority.

The ill-thinking Latins would say excusatio non petita, accusatio manifesta. And to think evil of others is a sin, but the guess is often right…

On March 15, 2023, the President of Saudi National Bank, which was the largest shareholder in CSG, made an announcement ruling out the purchase of any additional shares or injection of capital into CSG.

Following this announcement, the share price of CSG experienced significant downward pressure. By the end of March 15, 2023, the value of the stock had dropped by 24 percent, while the value of AT1s had also halved.

On the evening of March 15, 2023, FINMA and the SNB published a joint statement in which, among other things, the following was stated:

“Credit Suisse’s stock exchange value and the value of its debt securities have been particularly affected by market reactions in recent days. FINMA is in very close contact with the bank and has access to all information relevant to supervisory law. Against this background, FINMA confirms that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. In addition, the SNB will provide liquidity to the globally active bank if necessary. FINMA and the SNB are following developments very closely and are in close contact with the Federal Department of Finance to ensure financial stability.”

During an interview with NZZ on March 25, 2023, Swiss Federal Councillor Karin Keller-Sutter emphasized:

Die CS hat die regulatorischen Kapital- und Liquiditätsanforderungen immer erfüllt.

(CS has always met regulatory capital and liquidity requirements.)

This statement would be repeated multiple times during the March 19, 2023 press conference.

On March 16, 2023, CSG issued a press release announcing that the bank had obtained CHF 50 billion in liquidity from the Swiss National Bank by availing themselve of Emergency Liquidity Assistance (ELA). Credit Suisse also revealed that it intended to use part of the loan to repay some of its AT1 bonds and published a list of the bonds subject to repayment.

The news of the disbursement of a CHF 50 billion loan was also confirmed several times by Swiss Federal Councillor Karin Keller-Sutter.

In reality, instead of CHF 50 billion, CSG received only CHF 39 billion through the ELA. For the remaining part, CSG had been unable to provide the collateral required by this financial rescue instrument (which has a meager cost for the bank of 0.5% spread).

Therefore, on March 17, Credit Suisse had to borrow the remaining part of the required amount using the ELA-Plus bailout facility, which is much more costly (3% spread).

This misinformation caused CS’s stock to rise again on March 16 (+19%), which instead would probably have fallen had it been known that CS had no more collateral to offer to obtain new liquidity.

As revealed by Sonntagszeitung, on March 17, 2023 Credit Suisse requested FINMA’s permission to repay part of the AT1s, as announced to the media a day before.

However, FINMA unexpectedly rejected the proposal, hindering Credit Suisse from announcing the move and restoring market confidence. It also prevented the company from avoiding a loss of deposits.

On March 18, 2023, media reports surfaced about the negotiations for UBS’s takeover of Credit Suisse. Sources revealed the names of the individuals involved in the talks.

On Sunday, March 19, 2023, shortly after noon (12:45 p.m.), the Financial Times reported, based on four sources with direct knowledge of the facts, that a few hours earlier UBS had offered to acquire Credit Suisse for a total price of CHF 1 billion (CHF 0.25 per share).

According to WSJ, on the same day, Saudi National Bank offered around $ 5 billion to save Credit Suisse, contradicting its statement of March 15. The Saudi solution included the protection of bondholders. However, the Federal Council rejected the offer:

“On Sunday, there was a last-ditch effort by a group including Credit Suisse’s largest shareholder, Saudi National Bank, to keep the lender alive, according to people familiar with the offer. The group made a rival proposal to inject around $5 billion into Credit Suisse. Under the plan, Credit Suisse bondholders would have been fully protected. Swiss ministers rejected the offer outright, according to the people. The shareholders wanted the same government backstops being offered to UBS, such as the liquidity line, but were turned down.”

On Sunday at 7:30 p.m., a press conference began with Swiss Federal President Alain Berset, Swiss Federal Councillor Karin Keller-Sutter, FINMA Board Chair Marlene Amstad, Swiss National Bank Board Chair Thomas Jordan, UBS Board Chair Colm Kellehe, and CS Board Chair Axel Lehmann in attendance.

The President of the Swiss Confederation began by recounting the events of the past week that had affected Credit Suisse and then stated that (min. 4:13):

“On Friday the liquidity outflows and market relativity showed it was no longer possible to restore the necessary confidence and that a swift and stabilising solution was absolutely necessary. This solution is the take over of Credit Suisse by UBS.”

Surprisingly, in their emphasis-laden speeches, and not without a hint of pride in having saved CS and the Swiss and international financial market place from an unprecedented disaster, none of the conference speakers would have the intellectual honesty to say, frankly, clearly and intelligibly, that in the takeover of CS by UBS, the Federal Council and FINMA had decided to make a resounding gift (but with other people’s money) to UBS, by wiping out as much as CHF 16 billion of AT1 bonds. None of this would be mentioned by either Berset, Keller-Sutter, Jordan, Kellehe, let alone Lehmann.

A single hint, but one of incredibly ambiguous meaning, was contained in Marlene Amstad’s speech. After solemnly stating that (min. 26:37):

“Es zeigt sich dass die Player am Schweizer Finanzmarkt: der Bund, die Nationalbank, FINMA aber auch die Banken Lösungen finden können um Krisen zu begegnen und diese zu überwinden.”

(It shows that the players in the Swiss financial market: the Confederation, the National Bank, FINMA but also the banks can find solutions to face and overcome crises.)

FINMA’s Chairwoman of the Board of Directors continued by stating:

“Die heute präsentierte Lösung, die Übernahme der CS durch die UBS zusammen mit stabilisierenden Massnahmnen von Bund und SNB in Sachen Liquidität sowie von der Finma angeordneten Wandlung von entsprechenden AT1 Kapitalinstrumenten in Eigenkapital bringt Stabilität für Kundinnen und Kunden der Bank für den Finanzplatz und für die Finanzmärkte allgemein.”

(The solution presented today, the takeover of CS by UBS together with stabilising measures by the Confederation and the SNB in terms of liquidity and the conversion of corresponding AT1 capital instruments into equity ordered by Finma, brings stability for the bank’s clients, for the financial center and for the financial markets in general.)

Amstad merely stated that the conversion (“Wandlung”) of AT1s into equity (“Eigenkapital”) had been ordered by FINMA, but this statement was indeed misleading. The bondholders would have received shares as compensation if it had been a simple transformation. However, in the case of Credit Suisse, the bonds had been entirely written off without any compensation. It appeared quite clearly that none of the attendees intended to be direct about the uncomfortable details of the transaction during the conference, leaving the written press releases to address those issues later. This concealment of essential facts caused confusion among the journalists present, as was evident from the question asked by Nebelspalter journalist Dominik Feusi (min. 38:50):

“Habe ich das jetzt richtig verstanden dass die Aktionäre, die Halter von Pflichtwandelanleihen, die Obligationäre, Darlehensgeber, und so weiter, dass die jetzt ungeschoren davonkommen also dass wir faktisch die Saudis retten insbesondere deren Chef der am Freitag Abend ja letzlich der CS das Messer in den Hals gesteckt hat?”

(Have I now understood correctly that the shareholders, the holders of mandatory convertible bonds, the bondholders, lenders, and so on, are now getting off scot-free, that we are in fact bailing out the Saudis, especially their boss who finally stuck the knife in CS’s neck on Friday evening?)

The question made by Mr. Feusi demonstrated a lack of understanding that AT1 bondholders had just been robbed of more than 16 billion CHF. For this reason, the query required a sharp and unequivocal answer from the conference speakers. It was a topical moment to finally be clear, divest all ambiguity and remove any possible misunderstanding.

But none of this would happen.

Having received the thorny question, the conference speakers looked at each other until Swiss Federal Councillor Keller-Sutter said, “It is FINMA that must answer…”

But the response from Amstad, honorary professor at the University of Bern and senior fellow at Harvard University, was helpless and simply embarassing (min. 39:22):

“Also dazu muss ich festhalten…dass wir den AT1 ist ein Teil der “too big to fail Regulierung” … der so vorgesehen ist, dass man die entsprechenden Bonds -die von Investoren, nicht von kleinen Investoren sondern von [unverstehbar] den und grossen Investoren gehalten werden- dass die eben dann in equity gewandelt werden und dieses Teil der “too big to fail Regulierung” der ist jetzt hier eben auch ausgelöst worden von daher hat man eben auch eine Beteiligung der von Ihnen erwähnten Investoren.”

(So I have to say….that AT1 is a part of the “too big to fail regulation” …which is intended in such a way that the corresponding bonds — which are held by investors, not by small investors but by [unintelligible] and large investors — are then converted into equity and this part of the “too big to fail regulation” has now also been triggered here, which is why the investors you mentioned are also involved.)

So much for rigor and clarity!

To begin with, AT1s are more accurately classified as bail-in tools. Secondly, contrary to Amstad’s statement, some CS AT1s were issued with a denomination of only CHF 5,000 (e.g. ISIN CH0360172719, CH0494734384, CH0428194226, with a total value of more than 1 billion CHF!) and sold to retail investors, resulting in a total loss for many small investors. Thirdly, the CS AT1s did not undergo a conversion into equity but instead experienced a complete write-down.

The FINMA Board of Directors chairwoman’s statement certainly lacked accuracy and transparency.

Faced with such a confusing and uncomfortable answer, Swiss Federal Councillor Keller-Sutter tried to patch it up (min. 40:02):

“Darf ich hier kurz ergänzen?…das ist natürlich eine schmerzhafte Lösung für diejenigen die solche Beteiligung halten aber es ist eine ordnungspolitische korrekte Lösung”

(May I briefly add here…this is of course a painful solution for those who hold such participations, but it is a correct solution in terms of regulatory policy.)

She made, of course, a noble attempt….but what had the Federal Councilwoman added in terms of content, transparency and clarity? And what did a “correct solution in terms of regulatory policy” ever mean?

We can imagine the poor journalist leaving the room with a conspicuous question mark on his forehead.

However, final icing on the cake was to come at the very end of the conference. In the meantime, FINMA’s press release had begun to circulate online, which contained the following eloquent passage:

“Die ausserordentliche staatliche Unterstützung löst eine vollständige Abschreibung des Nennwerts aller AT1-Anleihen der Credit Suisse im Umfang von rund sechzehn Milliarden Franken und damit eine Steigerung des Kernkapitals aus.”

(The extraordinary government support triggers a full write-down of the nominal value of all Credit Suisse AT1 bonds in the amount of approximately sixteen billion Swiss francs and thus an increase in core capital.)

Finally taking the hint, a Reuters reporter formulated a question this time even more straight and unambiguous (hour 1:34:51):

“How come CS shareholders get something but bondholders of AT1 were wiped out?”

All eyes of the conference speakers were once again on Amstad, who abruptly emerged from a catatonic torpor. Her answer was again a clear, transparent and scientific gem:

“We we needed …um …so the AT1 …um …the whole package …um …has to intention to stabilise …um …the financial system and to assure the stability of the financial system and for this transition phase we needed the capital enter [??] um …foreseen instrument in such situation as in the too big to fail instrument is the AT1 and so this is why we choosen to …kind of to …still. …. stick to this …. too big to fail framework and to trigger only the ….the AT1…..”

Once again, the Chairwoman of the FINMA Board of Directors shielded herself by misusing the expression “too big to fail,” which she has repeatedly used in her speeches, without evidently saying anything substantive at all and especially without answering the reporter’s question at all:

Not a word about the prospectus of the AT1 bonds and the contractual conditions for ordering a write-down, which in this case were absolutely not given.

Not a word about why it was decided to enact the new Article 5a LiqH-NVO with emergency legislation and retroactive effect.

Not a word about why they wanted to totally sacrifice the savings of AT1 bondholders and instead save the shareholders.

Not a word about why the Saudi offer, which allowed the AT1 bonds to be saved, was rejected.

Which is truly astounding.

And again, why had the CSG, still on March 14, reassured AT1 investors ambigously about the bail in hierarchy and loss absorption waterfall? Didn’t FINMA state, just the day after, that “FINMA is in very close contact with the bank and has access to all information relevant to supervisory law.“?

And why had CSG CEO Ulrich Körner, even on March 14, made a statement to Bloomberg that did not match reality? Again, why didn’t FINMA take action ?

The entire Swiss political and financial Gotha attended the press conference on March 19th. People from all over the world were eagerly waiting to hear the statements of these influential personalities. Investors were particularly anxious to learn if they had lost their savings.

The audience was hoping to hear an honest and straightforward explanation. However, the speakers at the conference only put on a show and claimed to have found a solution to save Credit Suisse and the global financial market.

However, when they had to admit that they had used Tipp-Ex to cancel more than CHF 16 billion of AT1 bonds, which caused the loss of savings for thousand of people, they chose to hide behind written press releases and refused to take responsability for their actions.

Unspoken things. Amateurs in disarray. God forbid.

*Dr. Dario Item is Ambassador of Antigua and Barbuda to the Kingdom of Spain, the Principality of Liechtenstein, the Principality of Monaco and to the UNWTO.
He holds a PhD in criminal law (University of Parma), a double doctorate in law and political science and an international master’s degree (LL.M) in international financial crime.

** This story was also published on



Dario Item

Ambassador of Antigua and Barbuda to the Kingdom of Spain, the Principality of Monaco and the Principality of Liechtenstein