Risk register · entry
Q4 · Where models dieCredit Suisse / UBS
A 167-year-old G-SIB failed on confidence; AT1 bonds zeroed before equity.
The world stops matching the model. Regime change and leverage turn a small error fatal.
Why this quadrant
The payoff structure was contractually simple and fully modeled, an AT1 write-to-zero on a defined viability trigger, but the actual loss was driven by tail, non-linear behaviour, a depositor run and a single shareholder's offhand comment, that no capital model priced, and the resolution outcome inverted the very hierarchy the instrument was built to enforce.
The record
- CHF 16 billion / $17.2 billion of AT1 bonds written to zerocertain
- UBS paid CHF 3 billion / $3.2 billion in stock for Credit Suissecertain
- Equity holders received about $3.25 billion despite being junior to AT1 in the normal hierarchylikely
- CHF 67 billion in Q1 2023 deposit outflows; CHF 171.2 billion net withdrawals Oct 2022 to Apr 2023likely
- SNB emergency liquidity line of CHF 50 billion announced March 16, 2023certain
- Deal announced March 19, 2023; completed June 12, 2023certain
- Roughly $9 billion in AT1-related legal claims pending as of October 2023likely
- Swiss Federal Administrative Court ruled the AT1 writedown unlawful, October 2025; FINMA appealingcertain
- Job loss estimates ranging from 9,500-12,000 to as high as 30,000 combined positionsuncertain
- UBS posted near $30 billion Q2 2023 profit largely from negative goodwill on the deallikely
Sources
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