Canada’s banking regulator reaffirms creditor hierarchy after Credit score Suisse deal angers bondholders


(Reuters) – Canada’s banking regulator mentioned on Monday that those that maintain Extra Tier 1 (AT1) and Tier 2 debt might be entitled to a extra favorable consequence if a financial institution runs into hassle.

The Workplace of the Superintendent of Monetary Establishments bolstered its steerage within the wake of a rescue plan for Swiss lender Credit score Suisse that appeared to go away among the financial institution’s junior bondholders with nothing.

If a financial institution reaches the purpose of “non-viability”, widespread shareholders of the financial institution would be the first to undergo losses, the Canadian regulator mentioned.

Credit score Suisse mentioned on Sunday that 16 billion Swiss francs ($17.22 billion) of its AT1 debt might be written all the way down to zero on the orders of the Swiss regulator as a part of its rescue merger with UBS Group AG.

It means AT1 bondholders look like left with nothing whereas shareholders, who normally rank under bondholders when it comes to who will get paid when an organization collapses, will obtain $3.23 billion below the deal.

Legal professionals from Switzerland, the US and UK are speaking to numerous Credit score Suisse AT1 bond holders about attainable authorized motion, legislation agency Quinn Emanuel Urquhart & Sullivan mentioned on Monday.

($1 = 0.9285 Swiss franc)

(Reporting by Niket Nishant in Bengaluru; Modifying by Shounak Dasgupta)

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