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If the Swiss authorities had not commented, we might have been led to believe that they favored equity investors by wiping out senior capital. Although I am not an investor in AT1 bonds and do not know the specifics, I believe that the investors who did invest in them should have been diligent and read the fine print, as they claim to be sophisticated investors.
Just like notes issued by Chinese real estate developers, AT1 bonds are tempting in that they offer juicier coupon payments than plain-vanilla deposits. One Credit Suisse bond issued last year that was paying 9.75 per cent was particularly popular.
For years, Asia’s wealthy have been the profit centre at Credit Suisse’s crown-jewel wealth management division. They have been shaken by this fallout, unsure for weeks whether their money was safe with the Swiss bank.
Now, some may be looking at actual losses – to the tune of billions of dollars. Do they still have faith in their private bankers?
Credit Suisse is putting on a brave face, urging calm among its employees and carrying on with its annual investment conference in Hong Kong this week. (Media has been uninvited, to this columnist’s dismay). But deep down, its senior executives must know that the crazy, rich, anxious Asians are not happy, and the Swiss brand is not as prestigious as before.
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