Explanation:
The write-down of Credit Suisse's Additional Tier 1 (AT1) bonds reversed the typical capital hierarchy, where equity holders would usually be wiped out before bondholders in a bail-in. This deviation from standard practices caused confusion and undermined investor confidence in AT1 instruments, which are widely used in the banking sector.
A is incorrect. While the total amount of the write-down was significant (approximately $17 billion), the primary concern arose from how the write-down was handled rather than its magnitude.
B is incorrect. The write-down did not directly impact UBS's financial position since it occurred as part of Credit Suisse's resolution. UBS's position was strengthened by the deal.
C is incorrect. While communication and transparency are always important, the main issue was the unusual handling of the AT1 bonds, which raised questions about the predictability of regulatory actions in future crises.
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Q.6307 The write-down of Credit Suisse's AT1 bonds as part of its acquisition by UBS raised concerns about investor confidence. What specific aspect of this action caused the most significant concern?
A
Total amount written down.
B
Impact on UBS's financial position
C
Lack of communication from Swiss authorities.
D
Write-down outside a traditional bail-in.
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