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Shuli Ren

UBS, Switzerland and Those Angry AT1 Investors

This shotgun wedding may turn out to be very awkward for UBS if it’s unable to appease Credit Suisse’s wealthy Asian clients.

Where will investors direct their anger?

Where will investors direct their anger?

Photographer: Gianluca Colla/Bloomberg

Why do rich Asians deposit their money with the likes of UBS Group AG and Credit Suisse Group AG, instead of JPMorgan Chase & Co. and HSBC Holdings Plc? Switzerland is seen as a law-abiding, stable nation, untouched by the political turmoil and policy U-turns investors in emerging Asia are all too familiar with. Bollywood hit Dilwale Dulhania Le Jayenge, or The Big-Hearted Will Take the Bride, which portrayed the idyllic Alps, perhaps also contributed to that image.

That Swiss prestige just got eroded by the shotgun wedding between UBS and Credit Suisse. As a matter of expedience, Switzerland made emergency legislative changes so the deal could be pushed through without the shareholders’ blessings. Local regulators also brushed aside the standard corporate finance pecking order, forcing bigger losses on junior bondholders than shareholders.