Credit Suisse’s bondholders have now forced FINMA, the Swiss regulator that ordered the write-off of its notes, to disclose details on the order. This comes after bondholders holding ~$4.5bn of its AT1s filed a lawsuit having been left in the dark regarding the reasons for the regulatory order. The judge overseeing the case has ordered the regulator to hand over the decree, giving bondholders a stronger position to contest the write-off. Bondholders are also contesting Credit Suisse drawing on government-backed liquidity facilities prior to its UBS takeover. They state that FINMA’s write-off order could only have been done if government aid also bolstered the CS’s capital ratios, which was not the case. According to them, FINMA intervened with the write-off solely to aid CS’s liquidity.

However, as per the FT, FINMA’s decree stated that the government liquidity facilities had “a direct positive effect on the liquidity and capital situation”. This is also said to have satisfied a regulatory viability event” in the AT1’s covenants to trigger the write-off. Furthermore, the decree also states that CS came close to falling below minimum levels of cash held at SNB, the central bank. CS applied to the SNB for a CHF 39bn ($43bn) liquidity assistance on March 15, granted the following day. Also, it applied for another liquidity facility worth CHF 20bn ($22bn) from the SNB on March 17 due to massive outflows on March 16. One of the bondholders said, “That a bank supervisor would say such a thing is incredible. If every time a bank draws on central bank money it triggers their AT1s then we’d be in a real mess”.

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