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Write-down feature: Yes (I mean, it’s true that they would be converted to equity in some scenarios when capital levels are triggered - my comment was mislead

by kgwgk 4y ago

Write-down feature: Yes (I mean, it’s true that they would be converted to equity in some scenarios when capital levels are triggered - my comment was misleading - but it’s also true that they are wiped out in other scenarios and it’s the FINMA’s call in this case.)

blitzar 4y ago
FINMA’s also claimed that CS still had 14% capital (double the trigger lever) on Thursday - 20bn of capital seems to have vanished on Friday.
- kgwgk 4y ago
  https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-got-credit-suisse-for-almost-nothing https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-go... "In UBS’s deal to buy Credit Suisse, shareholders are getting something (about CHF 3 billion worth of Credit Suisse shares) and Credit Suisse’s AT1 holders are getting nothing: The Credit Suisse AT1 securities are getting zeroed. This is not, to be clear, exactly because Credit Suisse’s CET1 capital fell below 7%; instead, there is a separate clause of the AT1s allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.” Plus, in a situation like this, the banking regulators get to do a certain amount of ad hoc stuff, and they do. (They got rid of the shareholder vote on the deal!) Zeroing the AT1s while preserving a little value for the common does seem to have been done in an ad hoc way; my point is just that it follows very logically from the terms and function of the AT1s."
  - blitzar 4y ago
    All very true, however, if they still had 14% CET1 capital ... they didnt need a bail out, or to be sold etc. If however, they required a bail out ... then they cant have had that much capital left. It is not compatible to be bankrupt, but have 40bn of capital, while also only being worth 2bn - one of the statements has to be false.
    - kgwgk 4y ago
      https://www.ifre.com/story/3816115/should-have-known-better-the-write-down-of-credit-suisse-at1s-qx9xp6lznd https://www.ifre.com/story/3816115/should-have-known-better-... “There has also been some confusion about solvency being equal to viability. Viability is about the ability to operate viably and independently without any form of extraordinary state support, whereas solvency is merely the ability to pay debts as they fall due. So, one can be non-viable at one point, and still be solvent at that point, which may have been the case for Credit Suisse. Viability asks will the bank last on its own, and solvency asks can they pay their debts.”

by kgwgk 4y ago

blitzar 4y ago

FINMA’s also claimed that CS still had 14% capital (double the trigger lever) on Thursday - 20bn of capital seems to have vanished on Friday.

kgwgk 4y ago
https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-got-credit-suisse-for-almost-nothing https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-go... "In UBS’s deal to buy Credit Suisse, shareholders are getting something (about CHF 3 billion worth of Credit Suisse shares) and Credit Suisse’s AT1 holders are getting nothing: The Credit Suisse AT1 securities are getting zeroed. This is not, to be clear, exactly because Credit Suisse’s CET1 capital fell below 7%; instead, there is a separate clause of the AT1s allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.” Plus, in a situation like this, the banking regulators get to do a certain amount of ad hoc stuff, and they do. (They got rid of the shareholder vote on the deal!) Zeroing the AT1s while preserving a little value for the common does seem to have been done in an ad hoc way; my point is just that it follows very logically from the terms and function of the AT1s."
- blitzar 4y ago
  All very true, however, if they still had 14% CET1 capital ... they didnt need a bail out, or to be sold etc. If however, they required a bail out ... then they cant have had that much capital left. It is not compatible to be bankrupt, but have 40bn of capital, while also only being worth 2bn - one of the statements has to be false.
  - kgwgk 4y ago
    https://www.ifre.com/story/3816115/should-have-known-better-the-write-down-of-credit-suisse-at1s-qx9xp6lznd https://www.ifre.com/story/3816115/should-have-known-better-... “There has also been some confusion about solvency being equal to viability. Viability is about the ability to operate viably and independently without any form of extraordinary state support, whereas solvency is merely the ability to pay debts as they fall due. So, one can be non-viable at one point, and still be solvent at that point, which may have been the case for Credit Suisse. Viability asks will the bank last on its own, and solvency asks can they pay their debts.”