What is the Credit Suisse crisis? Lessons learned from the UBS rescue acquisition and full write-off of AT1 bonds

【summary】

The Credit Suisse crisis is an event that occurred in March 2023 when Credit Suisse, a major Swiss bank, fell into rapid credit instability and was eventually rescued and acquired by UBS.

What is important for investors is that banks are built on trust, that the outflow of deposits and customer funds will push banks into a corner in a short period of time, and that AT1 bonds have been fully written off.

In particular, while AT1 bonds have higher yields than straight corporate bonds, they also carry the risk of principal reduction or interest payment suspension in the event of a crisis. The Credit Suisse case shocked debt investors around the world, as AT1 capital instruments worth around CHF 16 billion were zeroed out, leaving shareholders with the purchase price in UBS shares.

However, legal disputes regarding AT1 depreciation have continued since then. In October 2025, the Swiss Federal Administrative Court ruled that FINMA's AT1 write-off order lacked legal basis. On the other hand, FINMA has indicated that it plans to appeal, and as of June 2026, it is necessary to separate the market fact that ``AT1 was fully written off in 2023'' and the issue of ``whether that order was legally reasonable.''

This article provides a general explanation of the Credit Suisse crisis and the structure of AT1 bonds, and does not recommend buying or selling specific bank stocks, bonds, AT1 bonds, or financial products. The terms and conditions of financial products, repayment order, principal reduction clauses, interest payment terms, and legal treatment vary depending on the issuer, country, and contract. Please consult the prospectus, official documents, latest legal situation and expert advice before making investment decisions.

What is the Credit Suisse crisis?

The Credit Suisse crisis is a financial crisis in which credit concerns at Credit Suisse suddenly surfaced in March 2023, leading to a rescue takeover by UBS at the initiative of the Swiss authorities.

Credit Suisse was one of Switzerland's leading banks. The company operated investment banking, wealth management, and asset management globally.

However, in the 2020s, a series of events began to undermine trust.

• Huge losses related to Archegos Capital Management
• Greensill related fund issues
• Distrust in risk management and governance
• Outflow of customer funds
• Deterioration of stock prices and credit indicators

FINMA's Credit Suisse Crisis Report also cited poor strategic execution, repeated scandals and management errors as leading to a loss of trust from customers, investors and the market.

Banking crises don't just happen because of numbers. What matters in the end is trust.

Why did the crisis occur?

The immediate trigger was the banking crisis in March 2023, but the problems had been building up even before then.

One of the representative examples is Archegos.

In 2021, Credit Suisse suffered losses of approximately $5.5 billion following the collapse of Archegos Capital Management. The US Federal Reserve also explained in its July 2023 action against UBS that Credit Suisse suffered a loss of approximately $5.5 billion due to Archegos' default.

This was not just a one-time loss.

Major banks may have failed to adequately manage the concentration of risk to specific customers. Was the investment banking division's risk management functioning? To what extent did management understand the problem?

The market saw it that way.

Even after that, credit concerns did not completely disappear, and when concerns about banks such as Silicon Valley Bank arose in the United States in March 2023, concerns about Credit Suisse suddenly increased.

Why is trust important for banks?

A bank's basic business is to collect funds from deposits and the market and use them for lending and investment.

Simplifying it considerably, we get the following structure:

預金者・投資家から資金を集める
  ↓
企業や個人へ貸し出す
  ↓
利ざやや手数料を得る

This model is strong while there is trust.

However, if depositors or customers feel that this bank is unsafe, they will withdraw their funds. Banks' assets are invested in loans and securities, so if a large amount of capital outflows in a short period of time, no matter how big the bank is, it will have difficulty raising cash.

This is what is called a bank run.

In the case of Credit Suisse, years of declining trust were compounded by the global banking crisis of March 2023. The market began to ask, ``Will this bank really stand alone?''

What happened in March 2023

In March 2023, banks such as Silicon Valley Bank collapsed in the United States, and investors around the world became sensitive to bank liquidity risks.

At that time, concerns about Credit Suisse flared up again.

*Stock prices plummet

• The outflow of customer funds continues
• Increased anxiety about market procurement
• Ratings and credit indicators are under threat
• Support measures from authorities will be required

FINMA said that in mid-March 2023, high levels of customer outflows posed an immediate risk of insolvency.

This is the scary thing about banks. Problems do not necessarily progress slowly like they do in factories and stores. When trust collapses, the time horizon suddenly shortens.

Rescue acquisition by UBS

On March 19, 2023, FINMA approved the acquisition of Credit Suisse by UBS.

On the same day, the Swiss National Bank announced that it would provide significant liquidity support to support UBS's acquisition of Credit Suisse.

Protecting Credit Suisse alone was not the only priority for authorities.

The broader objective was to stop the spread of uncertainty in the Swiss financial system, international financial markets, depositors and counterparties.

UBS announced the completion of its acquisition of Credit Suisse on June 12, 2023. This effectively marks the end of Credit Suisse's history as a major independent bank.

Why AT1 bonds became famous

AT1 bonds were the biggest issue during the Credit Suisse crisis.

AT1 bonds are equity securities intended to strengthen banks' capital. While they offer higher yields than straight corporate bonds, they can be subject to principal reductions, equity conversions, and suspension of interest payments in the event of a crisis.

In the Credit Suisse rescue acquisition, FINMA ordered a full write-off of the AT1 capital instrument. FINMA explains that Credit Suisse received federally guaranteed special liquidity support on March 19, 2023, thus fulfilling the contractual conditions of the AT1 product.

The amount was approximately 16 billion Swiss francs.

The image is like this.

Credit Suisse AT1債
  ↓
全額償却
  ↓
市場上は価値ゼロ化

Although AT1 bonds are often referred to as "bonds," they are completely different from straight corporate bonds. It is a capital instrument designed to absorb losses during a banking crisis.

Did you suffer losses before shareholders?

The reason why this case was remembered so strongly is that while AT1 bond holders suffered a total loss, shareholders were left with the purchase price in UBS stock.

In a normal sense, the order of loss absorption can be easily understood as follows.

株式
  ↓
劣後債・AT1債
  ↓
普通社債

In other words, the idea is that shareholders will suffer losses first, and then bond investors will suffer losses.

However, AT1 bonds are not straight corporate bonds. This is a product that can be subject to principal reduction or stock conversion depending on contractual terms and regulatory conditions.

In Credit Suisse's AT1, AT1 was fully written off in the rescue scheme, leaving shareholders with a certain amount of purchase consideration. For this reason, it was perceived that ``AT1 bond holders suffered losses before shareholders,'' which led to a big debate.

The important thing here is not to short-circuit that bonds are safer than stocks.

Even though the bond is the same, straight corporate bonds, subordinated bonds, and AT1 bonds are treated completely differently in times of crisis.

Also keep track of court decisions in 2025

The full write-off of AT1 in 2023 was a powerful event for investors.

However, legal disputes have continued since then.

In October 2025, the Swiss Federal Administrative Court announced that it had canceled FINMA's March 19, 2023 order for Credit Suisse's AT1 capital instrument write-down as lacking legal basis.

Meanwhile, FINMA has indicated that it plans to appeal this partial judgment to the Swiss Federal Supreme Court.

Therefore, the things investors should keep in mind as of June 2026 are as follows.

In other words, it cannot be said that ``AT1 will always be protected before stocks,'' nor can it be said that ``AT1 will always lose money before stocks.''

It is necessary to check the prospectus for each product, the legal system of the issuing country, the powers of the supervisory authority, and the relief scheme in times of crisis.

Lessons for investors to learn

Investors can learn a lot from the Credit Suisse crisis.

There is a reason for high yields.

AT1 bonds tend to have higher yields than straight corporate bonds.

But that yield is not a gift. This is compensation for principal reduction, suspension of interest payments, subordination, low liquidity, and bank regulatory risk.

It is dangerous to think that it is a good deal because the yield is high.

Even big banks aren't necessarily safe.

Credit Suisse was a major global bank.

Even so, if trust is lost, a crisis will occur in a short period of time. Banks are evaluated not only on their capital adequacy ratios, but also on deposit outflows, liquidity, funding costs, and market confidence.

When looking at bank stocks and bank bonds, I want to understand not only the superficial profits but also the structure that makes them vulnerable to credit instability.

It is important to read the contract terms

With products like AT1 bonds, you should look at the terms before the yield.

For example, you might want to check the following:

It is dangerous to buy AT1 bonds based on yield alone without reading this.

Positioning as subordinated bonds/AT1 bonds

To understand the Credit Suisse crisis, it is necessary to distinguish between straight bonds, subordinated bonds, and AT1 bonds.

Simplified considerably, the risk hierarchy looks like this:

普通社債
  ↓
劣後債
  ↓
AT1債
  ↓
普通株

Generally, the lower you go, the lower the repayment ranking, the higher the loss absorption capacity, and the higher the yield.

However, as the Credit Suisse case showed, the actual order of losses can vary depending on contractual terms and regulatory responses.

For beginners, it is best to remember that AT1 bonds are not ``ordinary bonds'' but ``equity instruments that have the potential to absorb losses in the event of a banking crisis.''

summary

The Credit Suisse crisis showed how important trust is to banks.

Years of scandals, risk management failures, huge losses, and outflows of customer funds have all combined to make it difficult for Credit Suisse to survive on its own amidst the banking crisis of March 2023. Swiss authorities led a rescue takeover by UBS to limit the spread of instability in the financial system.

The biggest lesson for investors is the AT1 bond.

Although AT1 bonds appear to have high yields, their principal can be reduced in a crisis. Credit Suisse's AT1 products, valued at around CHF 16 billion, were completely written off, resulting in huge losses for bond investors.

Furthermore, in 2025, the Swiss Federal Administrative Court ruled that FINMA's AT1 write-off order lacked legal basis, and FINMA indicated that it would appeal. In other words, this case serves as a teaching material that includes not only financial product risks, but also risks related to contract provisions, the authority of supervisory authorities, and the legal system.

When looking at high-yield products, the yield alone is not enough.

Check the repayment order, subordination clause, interest payment deferral, principal reduction clause, stock conversion, and even the authority of the supervisory authority. The Credit Suisse crisis reminded investors around the world of this basic principle.

source

• FINMA “FINMA approves merger of UBS and Credit Suisse”
• FINMA “FINMA provides information about the basis for writing down AT1 capital instruments”
• FINMA “FINMA publishes report and lessons learned from the Credit Suisse crisis”
• Swiss National Bank “Swiss National Bank provides substantial liquidity assistance to support UBS takeover of Credit Suisse”
• UBS "UBS completes Credit Suisse acquisition"
• Federal Reserve Board "Federal Reserve Board announces a consent order and a $268.5 million fine with UBS Group AG"
• Swiss Federal Administrative Court “Unlawful write-off of AT1 capital instruments”
• FINMA “FINMA to appeal partial decision of the Federal Administrative Court concerning AT1”
• Related article: What is a subordinated bond? Repayment order and risks behind high yield
• Related article: What is interest payment deferral? Interest payment deferral risk to be aware of with subordinated bonds