Lawsuits paint new picture for AT1 market’s Asia prospects
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Lawsuits paint new picture for AT1 market’s Asia prospects

A view of Credit Suisse signage at an office in Singapore
Photo: Reuters

Investors in Asia are still reeling from the shock write-off of Credit Suisse’s additional tier-1 bonds, threatening future demand for the product from the region’s ultra-wealthy.

When UBS rescued Credit Suisse in a hastily orchestrated government takeover in March, the controversial write-off of $17 billion worth of Credit Suisse’s additional tier-1 bonds led to heavy losses for high net-worth individuals and family offices in Asia and a spectacular fall from grace for this higher-yielding but risky product.

AT1 bonds are contingent convertibles that are a hybrid of debt and equity. This type of debt has long been popular with Asia’s private banks, which snapped them up for their ultra-wealthy clients because of the juicy yields on offer.

Why AT1s matter

- Additional tier-1 bonds act as shock absorbers if a bank’s capital level falls below a certain level.

- They can be converted into equity or written off.


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