March 20 (Reuters) - Canada's banking regulator said on
Monday that those who hold Additional Tier 1 (AT1) and Tier 2
debt will be entitled to a more favorable outcome if a bank runs
into trouble.
The Office of the Superintendent of Financial Institutions
reinforced its guidance in the wake of a rescue plan for Swiss
lender Credit Suisse that appeared to leave some of the
bank's junior bondholders with nothing.
If a bank reaches the point of "non-viability", common
shareholders of the bank will be the first to suffer losses, the
Canadian regulator said.
Credit Suisse said on Sunday that 16 billion Swiss francs
($17.22 billion) of its AT1 debt will be written down to zero on
the orders of the Swiss regulator as part of its rescue merger
with UBS Group AG .
It means AT1 bondholders appear to be left with nothing
while shareholders, who usually rank below bondholders in terms
of who gets paid when a company collapses, will receive $3.23
billion under the deal.
Lawyers from Switzerland, the United States and UK are
talking to a number of Credit Suisse AT1 bond holders about
possible legal action, law firm Quinn Emanuel Urquhart &
Sullivan said on Monday.
($1 = 0.9285 Swiss franc)
(Reporting by Niket Nishant in Bengaluru; Editing by Shounak
Dasgupta)
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