What are AT1 bonds, and why are Credit Suisse's worth $17 bn now wiped out?

The wipeout of $17 billion worth of AT1 bonds in the UBS-Credit Suisse deal has spooked investors as they now assess if this can happen to their AT1 holdings in other banks as well

The Swiss government-brokered takeover of Credit Suisse Bank by UBS Bank has kept global markets on their toes. Governments and regulators are making frantic efforts to avoid contagion. Banks are issuing statements to reassure their customers about their financial health. And investors are rushing to find safer instruments to invest in.

The investors' fear was accentuated after the UBS-Credit Suisse deal wiped out $17 billion worth of additional tier one (AT1) bonds of Credit Suisse. The owners of these have been left in the cold as they would now not receive even a single penny in the payout.

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