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Credit Suisse writedown: court examines release of more documents

credit suisse logo on a building
Credit Suisse: it's over half a year since the UBS takeover, but the brand is still present across Switzerland. Keystone / Alessandro Della Bella

A Swiss court is weighing whether to grant Credit Suisse investors access to more documents on a CHF16 billion ($17.6 billion) writedown of the bank’s bonds, a move the lender has opposed, filings seen by Reuters show.

Hundreds of bondholders have sued Swiss regulator FINMA in an effort to recoup their losses from the writedown that helped pave the way for Credit Suisse’s government-orchestrated takeover by UBS in March.

In the battle for disclosure, investors scored an early win in May when the St. Gallen court, in northeast Switzerland, ordered the release of FINMA’s decrees on the writedown.

+ More on the AT1 bondholder court cases

Credit Suisse, which is opposing the disclosure requests, argues that handing over documents such as private communications between the bank and the regulator could reveal confidential information and business secrets, according to a May 31 letter seen by Reuters.

If made public, the documents could shed further light on the financial health of the bank in the days before its collapse.

The Swiss parliament is holding an investigative commission on the rescue, but proceedings will be held behind closed doors and documentation on the deal has not been subject to the country’s Freedom of Information Act.

A representative for the Swiss Federal Administrative court in St Gallen declined to comment on ongoing proceedings. FINMA said the AT1 writedown in March was a necessary part of the overall package to enable the merger of the two banks.

A spokesperson at Credit Suisse declined to comment.

Overriding interests in secrecy should ensure investors don’t gain access to the records, a lawyer for Credit Suisse said in the May 31 letter to the Swiss court seen by Reuters.

+ Did the Swiss government do enough to save Credit Suisse?

Credit Suisse argues that financial institutions are required to disclose all relevant information to FINMA.

Should banks not be able to rely on such information being used only for supervision, it could undermine effective oversight, the letter stated.

The court said it would decide whether, and to what extent, files relating to the case can be shared with the complainants, a letter dated June 8 shows.

Dario Item, senior partner at I&P Law Office in Lugano and legal consultant to a group of Credit Suisse’s AT1 investors, told Reuters that bondholders have not heard from the court yet and a decision could come in coming weeks.

+ Where did it all go wrong for Credit Suisse?

“Accessing those documents is key for bondholders who have borne the brunt of this unprecedented and unacceptable FINMA’s order,” Item said.

“To restore trust within Swiss and foreign investors, we need transparency,” he added.

UBS is expected to present its own position in mid-October, according to one person familiar with the situation.

The bond writedown shocked the market and upended a long-established practice of granting bondholders priority over shareholders in a debt recovery.

Credit Suisse ceased to exist as a standalone legal entity in June when it was taken over by UBS.

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