EU authorities dissociate themselves from the Credit Suisse $17 billion bond reductions

Credit Suisse

Credit Suisse

Among the 30 banks considered to be internationally systematically important was Credit Suisse, one of Switzerland’s top financial institutions since its progenitor Schweizerische Kreditanstalt was established in 1856. A full collapse could have completely destroyed the world’s financial system.

Credit Suisse was divided into five divisions as of 2023: Capital Release Unit, Swiss Bank, Asset Management, Investment Bank, and Wealth Management.

The Swiss decision to cancel $17 billion of Credit Suisse’s bonds following the bank’s bailout caused European regulators to distance themselves from that decision.

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According to a Senate finance committee probe, Credit Suisse broke the terms of a 2014 plea agreement it had with the US authorities about the Swiss bank’s assistance in assisting rich Americans evade taxes.

The troubled Swiss bank, which is being acquired by rival UBS, broke the terms of the deal when it failed to tell the Justice Department about transferring nearly $100 million belonging to a U.S.-Latin American family from large undisclosed accounts to other banks for almost a decade, the report said.

Dominique Laboureix, chair of the EU’s Single Resolution Board, had a clear message for investors in an exclusive interview with CNBC.

“In [a banking] resolution here, in the European context, we would follow the hierarchy, and we wanted to tell it very clearly to the investors, to avoid to be misunderstood: we have no choice but to respect this hierarchy,” Laboureix said Wednesday.

It comes after Swiss regulator FINMA announced earlier this month that Credit Suisse’s additional tier-one (AT1) bonds, widely regarded as relatively risky investments, would be written down to zero, while stock investors would receive over $3 billion as part of the bank’s takeover by UBS, angering bondholders.

Credit Suisse was fined $2.6 billion as part of the 2014 agreement with the Department of Justice, but settled for $1.3 billion after pledging to follow disclosure regulations.