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Not according to Levine, who points out that this write down is not a result of CET falling below 7%, but a separate clause in the bonds that kicks in where a r

Not according to Levine, who points out that this write down is not a result of CET falling below 7%, but a separate clause in the bonds that kicks in where a regulator decides it needs to zero the bonds to prevent CS's insolvency. Other AT1s apparently do not have such clause, but that doesn't mean investors in those bonds are entirely safe from this ever happening to them. In the EU there is BRRD, which gives regulators extensive powers to resolve failing banks pretty much however they see fit. However, EU regulators have apparently put out a statement saying (basically) that they wouldn't do it this way and would let shareholders take the hit first. It's a little surprising to me that they would tie their hands like this, but I guess a lot of EU banks are heavily reliant on AT1 funding so they felt they had to do something to restore confidence.

JumpCrisscross 4y ago
> this write down is not a result of CET falling below 7%, but a separate clause in the bonds that kicks in where a regulator decides it needs to zero the bonds to prevent CS's insolvency That write-down to zero (versus automatic conversion) was front and centre makes the Swiss precedent limited, in my opinion. Nobody who ever trades AT1s will have public opinions about it. But from what I can tell, the rules were followed.
- cjbgkagh 4y ago
  It’s only limited if everyone was informed before, and informed now. Given the market moves neither appear to be the case. The mere impression of the open ended risk is sufficient to cause contagion. People will be looking closer at the regulatory discretion clauses in bail in legislation and probably not liking what they see.
  - JumpCrisscross 4y ago
    > the market moves neither appear to be the case A significant amount of that movement is being driven by Asian retail. How they were sold these is another question. AT1s without write-down may be a smart buy at the moment.
cjbgkagh 4y ago
They say they won’t but refuse to write the laws that way, which basically means they will but want people to believe they won’t right up until they do.

JumpCrisscross 4y ago

> this write down is not a result of CET falling below 7%, but a separate clause in the bonds that kicks in where a regulator decides it needs to zero the bonds to prevent CS's insolvency That write-down to zero (versus automatic conversion) was front and centre makes the Swiss precedent limited, in my opinion. Nobody who ever trades AT1s will have public opinions about it. But from what I can tell, the rules were followed.

cjbgkagh 4y ago
It’s only limited if everyone was informed before, and informed now. Given the market moves neither appear to be the case. The mere impression of the open ended risk is sufficient to cause contagion. People will be looking closer at the regulatory discretion clauses in bail in legislation and probably not liking what they see.
- JumpCrisscross 4y ago
  > the market moves neither appear to be the case A significant amount of that movement is being driven by Asian retail. How they were sold these is another question. AT1s without write-down may be a smart buy at the moment.

cjbgkagh 4y ago

They say they won’t but refuse to write the laws that way, which basically means they will but want people to believe they won’t right up until they do.