UBS to appeal AT1 bond court setback

UBS to appeal against AT1 decision Keystone-SDA

Swiss bank UBS intends to appeal against the Federal Administrative Court's verdict that the write-down of Credit Suisse's AT1 bonds had no legal basis.

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UBS joins Finma, which announced in mid-October that it intended to bring the case before the Federal Supreme Court.

With its appeal, UBS wishes to ensure that its point of view will be taken into account by the court. In addition, the credibility of the AT1 instruments must be preserved, given their key role in the reorganisation of the banks.

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The write-down of Credit Suisse’s AT1 instruments was a central element of the rescue plan, UBS emphasised. The big bank is convinced that this write-down was in line with the contractual terms of the AT1 instruments and the applicable law, and that Finma’s decision was legitimate.

Without the rescue plan, Credit Suisse would have been insolvent and would not have been able to continue its activities, stresses UBS.

In mid-October, the Federal Administrative Court issued a partial ruling overturning the Finma’s decision of March 19, 2023, according to which the AT1 bonds of the troubled Credit Suisse bank, worth just over CHF16 billion, were to be written down to zero.

However, the court did not rule on the consequences of this cancellation, namely any compensation to bondholders.

Additional Tier 1 (AT1) bonds are high-interest securities that can be written down to zero or converted into equity in the event of serious difficulties for the bank. In its ruling, the administrative court concluded that no contractual “viability event” had occurred in the case of Credit Suisse, i.e. no event that would have justified a write-down.

At the time of the impairment, Credit Suisse was sufficiently capitalised and met regulatory requirements.

In a decision dated October 23, the Federal Administrative Court announced that it was suspending all pending proceedings concerning Credit Suisse’s AT1 capital instruments. It is waiting for the Federal Supreme Court to rule definitively on Finma’s appeal.

Translated from French by DeepL/mga

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