Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

ECB backs global rules for bonds wiped out in Credit Suisse rescue

Published Nov 16, 2023 11:08AM ET Updated Nov 16, 2023 11:36AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A view shows the logo of the European Central Bank (ECB) outside its headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker//File Photo

FRANKFURT (Reuters) - The European Central Bank's chief supervisor on Thursday supported creating global standards for convertible bonds that were wiped out as part of Credit Suisse's rescue by rival UBS earlier this year.

Holders of Credit Suisse's Additional Tier 1 bonds with a notional value of 16 billion Swiss francs ($18.1 billion) lost their whole investment while stockholders received some shares in UBS - a differential treatment that triggered lawsuits and sent shockwaves through financial markets.

ECB chief supervisor Andrea Enria backed the decision by Swiss authorities, which reflected clauses enshrined in local bonds, but urged global standard-setters on the Basel Committee on Banking Supervision to put some order in this market.

"It would be good if the Basel committee could in future think further on some standardization of contracts in these areas," Enria told the annual conference of the European Systemic Risk Board.

"Adding some common features, I think, would be beneficial to avoid that there is a sort of contagion between different instruments and that everybody understands how they work in times of stress."

Speaking on the same panel, the Basel Committee's chairman Pablo Hernández de Cos said the issue was "on the list".

The Basel Committee said in a report last month it would review the features of AT1 bonds, including the "loss-absorbing hierarchy".

Shares are generally regarded as junior to bonds, meaning they suffer losses first in a crisis. But Credit Suisse's bonds contained a clause allowing authorities the write down those bonds without winding down the bank.

This clause is not a feature in bonds issued by European Union banks and the ECB has made clear that it would impose losses on shareholders first.

($1 = 0.8856 Swiss francs)

ECB backs global rules for bonds wiped out in Credit Suisse rescue
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email