Credit Suisse Crisis: Liquidity, AT1 Write-Down and UBS Takeover Lessons
A bank can meet capital ratios and still lose the confidence needed to fund itself. Credit Suisse showed how reputation, liquidity and market access interact.
Current position
On 19 March 2023, Swiss authorities supported UBS’s takeover of Credit Suisse. The transaction was completed on 12 June 2023. FINMA ordered the write-down of Credit Suisse additional tier 1 instruments with a nominal value of about CHF 16 billion. The event remains relevant to legal challenges and to the hierarchy and contractual terms of bank capital instruments.
Key facts at a glance
| Takeover announcement | 19 March 2023 |
|---|---|
| Completion | 12 June 2023 |
| Headline purchase consideration | CHF 3 billion in UBS shares under the announced terms |
| AT1 action | Approximately CHF 16 billion written down |
What this means in practice
Confidence can move faster than capital
Depositors and counterparties react to repeated losses, governance events and public signals. Liquidity can deteriorate before a quarterly capital ratio captures the full pressure.
AT1 is not ordinary debt
AT1 instruments are designed to absorb losses under contractual and regulatory triggers. Investors must read the exact terms, governing law and resolution framework rather than assume a universal ranking.
Rescue transactions change stakeholders differently
A forced or emergency combination can protect continuity of critical services while imposing losses or uncertainty on shareholders, bondholders and employees in different ways.
Practical example
A treasury dashboard shows regulatory capital above minimum but uninsured deposits are leaving rapidly and secured funding haircuts are rising. The correct escalation is a liquidity and confidence event, not a capital-compliance comfort message.
A practical decision framework
1. Define the exact claim
Identify the entity, product, transaction, period and legal forum. Do not apply a headline about one company, order or market event to a different fact pattern.
2. Reconcile the economics
Trace the claim to cash flow, balance-sheet exposure, contractual rights and the measurement definition. Separate revenue from transaction value, profit from liquidity and allegation from final outcome.
3. Check the operative record
Read the latest primary document and note whether it is a policy paper, interim order, final order, judgment, agreement, filing or historical report.
4. Convert the lesson into a control
Assign an owner, deadline, evidence requirement and escalation threshold. A lesson is useful only when it changes a decision or control.
Action checklist
- Track deposit concentration and speed of outflows daily in stress.
- Map collateral availability and central-bank funding access.
- Read AT1 and subordinated-instrument trigger language before purchase.
- Separate capital adequacy, liquidity and franchise confidence in reporting.
- Maintain recovery and resolution playbooks with communications scenarios.
Evidence and document checklist
- Liquidity coverage and deposit concentration reports
- Collateral and funding-capacity schedules
- Capital-instrument terms and prospectuses
- Regulator and central-bank communications
- Board recovery-plan and stress-test evidence
Common mistakes and red flags
Common mistakes
- Treating regulatory capital as a substitute for liquidity
- Assuming all AT1 instruments rank identically
- Ignoring repeated control failures because ratios remain compliant
- Using historic deposit stability during a digital run
Red flags
- Large uninsured or concentrated depositor base
- Rapid rise in credit-default or funding spreads
- Collateral calls coincide with deposit outflows
- Senior departures and repeated restatements weaken confidence
Escalation route
For regulated products or proceedings, start with the responsible entity’s grievance or compliance channel and preserve written records. Use the relevant regulator, exchange, court or tribunal process where applicable. Obtain specialist advice before a limitation period, filing deadline, tax position or material right is affected.