(Bloomberg) -- Dutch central bank chief Klaas Knot said he’s been left wondering why the Swiss allowed shareholders to get any money out of Credit Suisse Group AG, and will seek answers at future meetings with counterparts.
Knot, who is also chair of the Basel-based Financial Stability Board, praised authorities but said he’s curious on why the takeover deal didn’t write down the bank’s stock.
“They deserve, I think, a lot of respect for swiftness,” he told reporters at a briefing in Amsterdam on Thursday. “But there is this open issue, open question as to why did they fully write off the AT1 without actually also making sure that the value of the equities would also be written down to zero.”
The terms of UBS Group AG’s purchase of Credit Suisse caused financial-market jitters because of the precedent it created in reordering the creditor hierarchy for the deal.
“There’s been a statement explaining by the authorities why they wrote down the value of the AT1,” Knot said. “I’m actually interested in the question why they did not also make sure that the value of equity would be written down. And that’s a question that we will have to take up with the Swiss authorities at some point when we will meet them again at FSB, IMF gatherings.”
In an interview released concurrently with Dutch newspaper FD, Knot expanded on the theme.
“The Swiss regulator had this freedom. And given the interest rate, you as an investor could also have thought that this coco is very risky,” he was reported as saying. “The strange thing is that the shareholders still got away with €3 billion.’
The outcome will mean a tightening in bank financing conditions, and banks may quickly switch to stocks instead because an AT1 with a 9.8% coupon is “barely cheaper than equity,” he said, according to FD. Even so, “it could be that those banks have no choice but to extend less credit. And then citizens and companies will notice that.”
(Updates with comments to FD starting in sixth paragraph)
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