The Credit Suisse Write-Down of AT1 instruments has taken market participants by surprise, but it seems to be the result of the exercise of discretionary powers by the Swiss regulator rather than the establishment of a new market standard.
Given the current regulatory framework under Luxembourg and EU law, it seems unlikely that AT1 instruments issued by Luxembourg based institutions are written down before CET1 instruments had al-ready absorbed all the losses they could. Investors should take a closer look beforehand at the contractual terms of the AT1 instruments they intend to subscribe.
The GSK Update provides further insights regarding additional tier 1 instruments’ principal write down under Luxembourg and EU legislation.
Valerio Scollo, LL.M. (NYU), LL.M. (NUS)