Switzerland’s move to wipe out $17 billion of Credit Suisse Group AG bonds has prompted investors to reassess a market integral to the safety and resilience of Europe’s banking system.
The Credit Suisse bonds that were written down as part of its takeover by UBS Group AG UBS -3.52%decrease; red down pointing triangle were known as AT1s, or Additional Tier 1 bonds. These instruments exploded in popularity in Europe over the past decade and were seen as a way to build buffers that could protect banks in times of trouble without having to tap taxpayer funds.
The total write-off by Swiss regulators has divided opinion, with some market-watchers saying that it was justified under the terms of the bonds, while others hotly dispute that analysis.
Source : European Bank Capital Bonds Tumble as Credit Suisse Write-Off Hits Market