SINGAPORE – A group of Credit Suisse Group bond holders in Asia challenged Switzerland’s banking regulator over the decision to write down about 16 billion Swiss francs (S$24 billion) of the bank’s riskiest debt, the first known move by wealthy investors in the region.
The filing was made in the Swiss courts on Wednesday, said Mr Mahesh Rai at Singapore-based Drew & Napier. Mr Rai is acting for more than 60 investors across Asia for the case. He declined to specify the losses involved.
The move appeals against the Swiss Financial Market Supervisory Authority’s (Finma) decision to prioritise shareholders over the additional tier one (AT1) bond holders, he said.
The investors are seeking to “revoke the Finma order to write off the bonds”, and also for the claimants to be awarded compensation, said Mr Rai, who is working with colleague Benedict Teo on the case.
Finma declined to comment. It has previously published its position on the write-down, explaining that it was part of a takeover plan that was the least bad option after Finma and the government rejected a resolution of Credit Suisse or temporary nationalisation.
Bond holders in Asia are joining more than a thousand others in Europe and the US in seeking damages from the Swiss authorities.
Law firm Pallas Partners, which filed a suit in April, is seeking full compensation for its clients – 90 institutional investors and asset managers with US$1.35 billion (S$1.8 billion) in so-called AT1 bonds, as well as 700 retail and family office clients accounting for some US$300 million.
US law firm Quinn Emmanuel also filed a claim in Swiss court representing more than 400 institutional investors who held about US$4.5 billion worth of AT1s. Besides these, at least two other complaints have been filed.
Created after the 2008 financial crisis, AT1s are the lowest rung of bank debt, producing juicy returns in good times but taking the first hit when a bank runs into trouble. Shareholders – often the first domino to fall in such situations – salvaged some value from the takeover engineered by the Swiss authorities, while Credit Suisse’s AT1 holders walked away with nothing.
Many bond holders were furious at the move. European regulators hurried to reassure investors that the Swiss arrangement was an exception.
Separately, there are about 100 investors from Singapore to the Philippines who have expressed interest to Drew & Napier in commencing a treaty claim against the Swiss government in relation to the loss from the Credit Suisse AT1 notes, Mr Rai said. The treaty claim has not yet been filed, he added.
A spokesman for Switzerland’s Federal Department of Finance declined to comment on any potential lawsuits.
“Investors who have suffered losses are free to take legal action, which is their right. Switzerland is a constitutional state,” the spokesman said. BLOOMBERG
