If a bank gets into trouble, a more favorable outcome for those who hold additional Tier 1 AT 1 and Tier 2 debt will be given, according to the banking regulators of Canada.
In the wake of a rescue plan for Swiss bank Credit Suisse, the Office of the Superintendent of Financial Institutions reinforced its guidance in the wake of a rescue plan that appeared to leave some of the bank's junior bondholders with nothing.
Common shareholders of the bank will be the first to suffer losses if a bank reaches the point of non-viability, the Canadian regulator said.
Credit Suisse said on Sunday that 16 billion Swiss Francs $17.22 billion of its AT 1 debt will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS Group AG.
It means that AT 1 bondholders seem to be left with nothing while shareholders, who usually rank below bondholders in terms of who gets paid when a company collapses, will get $3.23 billion under the deal.
According to Quinn Emanuel Urquhart Sullivan, lawyers from Switzerland, the United States and UK are talking to a number of Credit Suisse AT 1 bond holders about possible legal action.