Former bondholders of failed bank Credit Suisse have launched a lawsuit against Swiss regulators over the decision to wipe out their $18 billion U.S. investment during a
government-orchestrated takeover of the troubled lender.
Lawyers representing Credit Suisse bondholders say their clients are seeking compensation for being unlawfully deprived of their property rights during Credit Suisse's takeover by rival bank UBS (UBS).
It is the first major lawsuit in the public domain to be filed over the decision to wipe out around $18 billion U.S. of Credit Suisse's Additional Tier 1 (AT1) debt during the government rescue plan, which shocked markets and investors around the world.
The lawsuit targets FINMA, the Swiss Financial Market Supervisory Authority, which ordered the bond write down in March of this year.
Executives at FINMA have said that their decision to impose steep losses on bondholders was legally sound because the Swiss government’s emergency legislation allowed for a total write down in a “viability event” situation.
Engineered following the 2008 financial crisis, AT1 bonds are designed to ensure that investors, not taxpayers, carry the burden of risk in the event that a bank runs into trouble of fails.
