Credit Suisse / AT1 2023
Credit Suisse’s March 2023 state-brokered sale to UBS wrote AT1s to zero while common equity kept residual value — a hierarchy shock that repriced the entire AT1 market.
Definition
Swiss resolution law allowed AT1 write-down without a full common wipeout. Holders who thought they were senior to equity learned they were a contractual loss-absorbing layer. Spreads on surviving European AT1s gapped, then partly retraced after other authorities restated their own hierarchies.
Why it matters
It is time-inconsistency in bank capital: the going-concern story versus the Sunday-night statute. Pricing AT1 as ‘cheap equity with a coupon’ missed the clause.
Case
19 March 2023 announcement. AT1 market froze, then differentiated by jurisdiction. UBS’s own paper and EU/UK statements tried to ring-fence the Swiss reading.
How to read it
Read the indenture and the national resolution law, not the rating agency one-pager. Hierarchy in marketing is not hierarchy in a crisis.