Photo by Pep Stojanovski via Unsplash.

Credit Suisse’s AT1 debt write down to raise market prices for new issuances

This could hamper issuance of new AT1 in the future.

Credit Suisse’s write down of $17.2b additional tier 1 (AT1) debt will lead to higher costs when raising capital in the future, even in Asia, analysts said.

The CS writedown has highlighted to AT1 investors that they are at risk of taking heavy losses as part of any bail-in, according to S&P Global Ratings.

“We predict that investors will demand notably higher coupon rates for new AT1 instruments in future,” S&P said in a report.

Alicia Garcia Herrero, Natixis Asia Research's Chief Economist for Asia Pacific, echoed this. "A likely scenario is the financial sector will need to pay a higher cost when raising capital, which will also affect Asia, and it can lead to a selective approach and more constraints on credit growth ultimately," she said.

Both Guerrero and S&P noted that the extent to which this trend plays will vary for individual banks, jurisdictions, and instrument structures, as investors work through their revised perceptions of risk.

"Investors appear to worry that CS is not a standalone case as regards the safety of AT1 and other similar instruments. However, there are indeed differences in the capital framework in each market and other regulators have shown a different stance," Garcia Herrero noted.

ALSO READ: Write-off of CS AT1 securities no risk to SG banks: analyst

S&P expects the cost of regulatory capital to come under pressure and may lead to reduced regulatory capital flexibility across the sector.

“Banks with capital needs may have to reposition toward common equity raising or reduced distribution levels, or else curtail balance sheet expansion. This trend may improve the quality of capital for those banks but may also have implications for balance sheet strategies and lending capacity whether as part of a formal resolution or a market-based solution to help an ailing bank and protect its senior creditors,” the report stated.

Follow the link for more news on

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!


Hong Kong’s livi bank launches game-changing app for SMEs
Going fully digital on opening accounts and approving quick loans to SMEs raises ‘livi Business’ disbursements to over HK$70m (US$8.9m) as of end-April.
3 principles guide Bank Aladin Syariah in tapping Indonesia’s customer segments
Within a year, the digital sharia bank got past low penetration to record 1.7 million customers and now targets multiple times growth by end-2023.
Bankers face sluggish hiring market, layoffs in Hong Kong
Industry insiders reveal how investment banks prioritize cost efficiency and productivity over hiring new employees.