From the archiveCase study · Mar 20236 min read
Credit Suisse and the CHF 16bn AT1 wipeout
UBS bought Credit Suisse for CHF 3bn in shares while regulators wrote CHF 16bn of AT1 bonds down to zero — so shareholders got paid and the bondholders ranked above them got nothing.
On 19 March 2023 UBS agreed to buy Credit Suisse for CHF 3bn in shares, and FINMA ordered about CHF 16bn of AT1 bonds written down to zero.
Shareholders kept CHF 3bn while the bondholders ranked above them got nothing, so AT1 prices slid across Europe until EU and UK authorities said equity still loses first.
The state backstops were repaid or ended within five months, but in October 2025 a Swiss court ruled the write-off unlawful, and FINMA appealed to the Federal Supreme Court.
The trader’s angle
Seniority in bank capital is set by contracts and local law, not textbooks — and a rescue can still wipe out the bondholders.
AT1 bonds written off
CHF 16bn
downto zeroFINMA ordered a complete write-down of all 13 Credit Suisse AT1 bonds on 19 March, saying the extraordinary government support triggered it.
Paid to shareholders
CHF 3bn
CHF 0.76 a sharePaid in UBS stock: one UBS share for every 22.48 Credit Suisse shares. The most junior investors still got something.
CS AT1 bond price, 15 Mar
31 cents
downfrom 72 a day earlierAfter Saudi National Bank ruled out more money, the market priced severe losses — four days before the write-off.
Emergency liquidity on offer
CHF 200bn
CHF 168bn lent at peakTwo new Swiss National Bank lines of up to CHF 100bn each, one with a federal default guarantee, on top of standing facilities. The central bank called its peak lending the largest liquidity assistance ever given to a single bank.
A bank is funded — from safest to riskiest — by deposits, senior bonds, subordinated Tier 2 bonds, and shareholders’ equity, known as . In a textbook failure, losses climb the from the bottom: equity is wiped out first, then AT1, then Tier 2.
AT1s pay high coupons because they are built to absorb losses while the bank is still alive — written down or converted into shares if capital falls below a trigger, or if regulators decide the bank has reached its . Exactly when that happens is spelled out in each bond’s prospectus.
What happened
Credit Suisse, one of Switzerland’s two global systemically important banks, entered 2023 badly weakened. It had lost CHF 7.3bn in 2022, deposits were down about two-fifths over the year and it had suffered a string of scandals. Then SVB failed.
On Wednesday 15 March the chairman of Saudi National Bank, its largest shareholder with 9.9%, said ‘absolutely not’ when asked about putting in more money. The shares fell 24% to a record low, and five-year , the cost of insuring its debt, jumped above 1,000. Its AT1 bonds fell from 72 to 31 cents on the dollar.
A pledge of liquidity from the Swiss National Bank (SNB) that evening, and the bank’s plan to borrow up to CHF 50bn, didn’t stop the . On Sunday 19 March UBS agreed to buy Credit Suisse for CHF 3bn in UBS shares.
The deal was backed by up to CHF 200bn of SNB liquidity and a CHF 9bn government loss guarantee. FINMA, the Swiss regulator, ordered all ~CHF 16bn of AT1 written down to zero: the bondholders lost everything.
Why it happened
Credit Suisse didn’t run out of capital; it ran out of trust, then cash. Depositors pulled CHF 13.2bn on 15 March alone, and by Sunday FINMA judged the bank to be at the despite strong capital ratios. Every option short of bankruptcy — a takeover, a resolution or temporary state ownership — needed massive support from the SNB as .
The AT1 outcome came from the fine print. The prospectuses defined a ‘viability event’ allowing a full write-down — including if the bank received extraordinary support from the public sector without which it would have failed. FINMA said the government-guaranteed liquidity line met that test, and an emergency ordinance adopted that Sunday gave it explicit power to order the write-off.
And this was a takeover, not a formal resolution. Shareholders weren’t ; they were bought out by UBS, albeit heavily diluted. So the most junior claim kept CHF 3bn while the claim above it got nothing.
How it ripples through markets
From one shareholder's comment to a CHF 16bn wipeout
- 1
Years of losses drain trust
A CHF 7.3bn loss for 2022, deposits down about 40% over the year and a delayed annual report leave no margin for error.
- 2
The top shareholder rules out more money
downCS shares15 Mar: Saudi National Bank says 'absolutely not', closing off the obvious source of fresh capital. The shares fall 24% to a record low.
- 3
The run accelerates
upCS 5y CDSCHF 13.2bn of deposits leave in a day and CDS jumps above 1,000bp; an SNB liquidity pledge fails to calm clients.
- 4
A state-backed weekend takeover
FINMA judges the bank non-viable. 19 Mar: UBS buys Credit Suisse for CHF 3bn in shares, backed by up to CHF 200bn of liquidity and a CHF 9bn loss guarantee.
- 5
Public support trips the AT1 trigger
downCS AT1 bondsThe bonds’ terms allow a full write-down if the bank needs extraordinary public support to survive, so FINMA orders all ~CHF 16bn of AT1 written down to zero, while shareholders receive UBS stock.
- 6
AT1 markets doubt the hierarchy
downEuropean AT1 pricesIf AT1 can lose before equity, it is riskier than investors thought, so other banks’ AT1 prices slide; EU and UK authorities rush to confirm that equity still loses first.
Why it mattered for traders
Most investors treated the as a law of nature: equity loses first. Credit Suisse showed that seniority is whatever the contract and local law say it is. Its AT1s carried a public-support trigger, the deal was done outside resolution and the legal basis was finalised over a weekend — yet the trigger had been in the prospectus all along.
The shock hit AT1 markets across Europe as buyers doubted the hierarchy itself: through fear, not direct losses. On Monday 20 March other authorities moved to ring-fence it. ECB Banking Supervision, the Single Resolution Board and the European Banking Authority said that in the EU common equity absorbs losses first, and AT1 only after equity is fully used. The Bank of England said UK AT1 ranks ahead of and behind Tier 2. The lesson: price jurisdiction risk, not just credit risk.
What happened next
The state backstops were short-lived. Credit Suisse repaid the government-guaranteed liquidity line by 31 May and its other emergency line, ELA+, by 10 August. UBS, which completed the takeover on 12 June, ended the CHF 9bn loss guarantee on 11 August 2023 without ever drawing on it. Later that year ECB supervisors said the AT1 market had been impaired for a while but was recovering.
The legal fight lasted far longer. In October 2025 Switzerland’s Federal Administrative Court ruled the write-off unlawful, finding that the contractual viability event had not been triggered and that the legal basis was insufficient. FINMA appealed to the Federal Supreme Court. Whatever the final verdict, the lesson stands: the trigger matters as much as the ranking.
Academy lessons for this story
- C1The credit universe and the capital structureLine up who a company owes, in the order they get paid, and work out what each lender gets back if it fails.
- C6The primary market and bond featuresSee how a new bond is sold, measure the small discount it is sold at, and say how a call or a put changes a bond’s spread.
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Sources
- FINMA — FINMA approves merger of UBS and Credit Suisse
- Swiss National Bank — Swiss National Bank provides substantial liquidity assistance to support UBS takeover of Credit Suisse
- FINMA — FINMA and the SNB issue statement on market uncertainty
- UBS via Business Wire — UBS to Acquire Credit Suisse
- Swiss Federal Administrative Court — Unlawful write-off of AT1 capital instruments
An original summary written from the sources above. Figures are rounded; follow the links for the full record.
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