Two sources with knowledge of the matter said on Sunday that Swiss authorities are looking at imposing losses on Credit Suisse bondholders as part of a rescue of the bank.
According to the sources, European regulators are apprehensive about such a move for fear that it could damage investor confidence elsewhere in Europe's financial sector.
A final decision was not taken, and the terms could still change, according to the sources.
If Credit Suisse were wound down rather than taken over by UBS, the losses on bondholders could be larger, according to one of the sources. Before financial markets resume on Monday, authorities are trying to engineer a takeover of Credit Suisse by the UBS.
FINMA, the Swiss regulator, did not respond to a request for comment. Credit Suisse and UBS didn't want to say anything.
Bond investors are hopeful that a takeover by UBS will mean their Additional Tier 1 bonds are converted into UBS stock and more of their money is protected, two bondholders told Reuters.
One investor said that the price of Credit Suisse's Additional Tier 1 bonds went up on Sunday after the Financial Times reported that UBS had offered $1 billion to buy its rival.
Credit Suisse bonds plunged into troubled territory at or below 30 cents on the dollar this week, as investors worried about the health of the bank even after the Swiss National Bank provided a $54 billion emergency loan.