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There are two points with the “bailout” that are very concerning:
- AT1 Bondholders (CoCo) wiped out ahead of equity holders – this will trigger repricing of AT1s across the board
- The speed of the deal is astounding – how bad was the run on Credit Suisse last week?
Asian lenders may find it difficult to replenish their capital by issuing Additional Tier-1 (AT1) bonds, Citigroup said in a research note on Wednesday, after the Swiss authorities’ move to wipe out Credit Suisse bonds as part of its takeover deal.
The challenge will be particularly acute for a large number of smaller banks in Asia more reliant on AT1s compared with Western peers due to tighter regulatory liquidity requirements....