A former Credit Suisse advisor assured a client in spring 2023 that there were no significant outflows and encouraged him to purchase AT1 bonds – with devastating consequences.
Just three days before the Swiss Federal Council approved measures on 19 March 2023, enabling UBS to acquire Credit Suisse (CS), a CS advisor reassured a client via email that everything was fine and there were no significant outflows.
This was reported by «Antigua News», an online platform published by Ticino-based lawyer Dario Item, which has gained a reputation for being well-informed and has documented past legal disputes regarding convertible bonds.
Client Advisor Reinforced His Convictions
The individual in question is a risk management expert who had a longstanding open banking relationship in Zurich, through which he regularly conducted stock market transactions.
On 16 March 2023, the client wrote to his advisor at CS, expressing interest in investing in AT1 bonds and requesting assistance in finding CS bonds trading below their nominal value.
Having analyzed the situation and reviewed all public statements from CS CEO Ulrich Körner, Chairman Axel Lehmann, the Swiss Financial Market Supervisory Authority (FINMA), the Swiss National Bank, and Finance Minister Karin Keller-Sutter, the client concluded that the market panic appeared exaggerated.
The advisor’s response was swift and further reinforced the client’s convictions. The advisor wrote (copying in a CS colleague):
«What a week! I’m still struggling to understand this wave of stress. Fundamentally speaking, CS’s metrics are among the best in the world, and at least on our side, we haven’t seen significant outflows in Q1. The LCR even improved from 144 to 150. I’m personally upset for two reasons:
- The media have misrepresented their reports on CS, creating a spiral that doesn’t correlate with the fundamentals. I even heard this morning on French radio that CS was in trouble, and that honestly makes me angry.
- Although CS received backing from the SNB and FINMA yesterday, this could have come earlier to relieve the pressure. The same goes for our main shareholders, who could have reiterated the strong financial position and the benefits of the ongoing restructuring. This could have helped maintain trust and quash unfounded rumors.»
Just four minutes later, the advisor followed up, realizing he had made a typo that could cause confusion: «AN UNWANTED TYPO: I meant we haven’t seen significant outflows in Q1».
Three Days Later: The Bad News
Reassured by the CS advisor’s statements, the client decided to purchase nominal $200,000 worth of a Credit Suisse AT1 bond (ISIN USH3698DDQ46) at a discounted price of $93,077.55, including fees and accrued interest.
However, just three days later, on March 19, he discovered that he had lost his money. Like many other investors, he was in complete shock. He couldn’t understand how the AT1 bonds had been written down, despite claims from Credit Suisse and Swiss authorities that the bank had met all regulatory requirements.
At the time, the client was unaware that the reality was far different.
The True Situation Was Concealed
In fact, according to Finma’s report dated December 19, 2023, titled «Lessons Learned from the CS Crisis» (page 36), the outflows during the week of March 13 to 17 of 2023, were substantial: 1.6 billion Swiss francs ($1.9 billion) on Monday, March 13; 2.7 billion francs on Tuesday, March 14; 13.2 billion francs on Wednesday, March 15; 17.1 billion francs on Thursday, March 16; and 10.1 billion francs on Friday, March 17. These massive outflows prompted «counterparties to demand additional collateral».
It is evident that the CS advisor did not provide the client with accurate information. According to Antigua News, this was not an isolated incident.
«In fact, individuals at all levels of the company apparently concealed the true state of Credit Suisse during the week of 13 March 2023», the portal reports.
