Dario Item and the AT1 Bond Wipeout: Inside the Credit Suisse Collapse

Two years after the abrupt write-off of Credit Suisse's Additional Tier 1 (AT1) bonds during its emergency takeover by UBS in March 2023, the financial and legal repercussions continue to reverberate globally. The decision, which erased approximately $17.3 billion (equivalent to CHF 16 billion at the March 2023 exchange rate of roughly 1 USD = 0.925 CHF; equivalent also to £14.24 billion at the exchange rate of roughly 1 USD = 0.823 GBP during the same time), stunned bondholders, sparked debates over regulatory transparency, and ignited lawsuits across jurisdictions from Europe to the United States. Among those shedding light on this complex saga is Dr. Dario Item, a Swiss-born lawyer and diplomat representing Antigua and Barbuda. Through his embassy's news outlet, Antigua.news, Item has published critical regulatory documents, timelines, and analyses that have become vital resources for media and legal teams pursuing investor claims.

The AT1 Bond Structure: High Risk, High Reward?

Introduced post-2008 financial crisis, AT1 bonds are hybrid securities designed to bolster a bank's capital buffer during distress. Offering higher yields to offset their risk, these instruments can be written down or converted into equity if a bank's capital ratio falls below predefined thresholds. In the creditor hierarchy, AT1 bondholders rank above shareholders but below senior bondholders, implying that shareholders should bear losses first. However, the Credit Suisse case upended this expectation: shareholders received UBS shares in the rescue deal, while AT1 bonds were nullified entirely. This inversion of the creditor hierarchy fueled outrage among investors and raised questions about contractual clarity and regulatory discretion.

The controversy hinges on the bonds' terms, which allow regulators to write them off in cases of 'viability risk'. While FINMA, the Swiss Financial Market Supervisory Authority, justified the wipeout as necessary for financial stability, bondholders argue it breached the understood priority of claims and lacked transparency. The fallout has exposed vulnerabilities in AT1 bond structures, prompting scrutiny of their role in global banking.

The Emergency Weekend of March 2023

The crisis unfolded rapidly over 18-19 March 2023. Credit Suisse, grappling with plummeting market confidence and deposit outflows, faced collapse. Under intense pressure, the Swiss Federal Council, FINMA, and the Swiss National Bank orchestrated a swift takeover by UBS for CHF 3 billion (£2.66 billion). The terms, announced on 19 March, included the complete write-off of AT1 bonds, citing a contractual clause triggered by the bank's 'viability risk'. The decision prioritised systemic stability but left bondholders reeling, many of whom felt blindsided by the abrupt loss of their investments.

Investors criticised the lack of clear communication during the merger process. Public statements from regulators emphasised urgency, but internal documents later revealed inconsistencies in how the decision was framed. These discrepancies have become central to legal challenges, with bondholders questioning whether FINMA overstepped its authority or misinterpreted the bonds' terms.

Dario Item's Role in Uncovering the Truth

Dr. Dario Item, through Antigua.news, has played a pivotal role in illuminating the AT1 controversy. In May 2023, the outlet published previously undisclosed FINMA orders related to the wipeout, highlighting discrepancies between public statements and internal regulatory reasoning. These documents drew attention from major outlets like the Financial Times, Finews, and El País, as well as legal teams building cases against Credit Suisse and its regulators.

Subsequent reports from Antigua.news provided further insight:

• October 2023: 'Credit Suisse AT1s CASE: The Unspoken Things' critiqued the 19 March press conference, pointing to gaps in transparency during the merger.
• November 2023: Articles like 'Credit Suisse AT1 Bonds: The Missed Opportunity' and 'CSG AT1s CASE: Class Action in the US Against Credit Suisse, Its Officers and PwC' detailed perceived inequities and emerging litigation.
• April 2024: 'Credit Suisse AT1: FINMA Asks Court Not to Show Files to Plaintiffs' covered efforts to withhold regulatory files from bondholders.
• September 2024: 'AT1 Case: Credit Suisse Relationship Managers Lied to Clients, Too' revealed internal communications suggesting clients were misled about the bank's stability.

While Item is not a litigant, his releases have provided primary source material, aiding lawyers in identifying areas for discovery and supporting media narratives on the case's broader implications.

Legal Battles Across Borders

In the United States, Core Capital Partners Ltd. filed a class action in the Southern District of New York on behalf of AT1 bondholders. In a recent ruling, Judge Colleen McMahon designated AT1 holders as a distinct class, separate from shareholder litigation led by Ali Diabat. Discovery, set to conclude by 22 August 2025, will include depositions, internal communications, and regulatory correspondence—areas where Item's disclosures have already offered valuable leads. Class certification is scheduled for 19 September, with responses and replies extending into late October.

In Switzerland, bondholders are challenging FINMA's authority to prioritise shareholders over AT1 holders, focusing on the 'viability risk' clause's interpretation. In the UK, institutional investors are exploring claims under English law, citing inadequate disclosures during the bonds' marketing. The cross-border nature of AT1 holdings, often managed through funds in multiple jurisdictions, complicates these efforts, requiring coordinated legal strategies.

Regulatory Ripple Effects

The Credit Suisse debacle has sparked broader regulatory discussions. The European Central Bank and European Banking Authority have emphasised that, within the EU, shareholders should absorb losses before AT1 bondholders in resolution scenarios. They are now exploring standardised AT1 contract terms to prevent future disputes. In Switzerland, lawmakers have proposed enhancing parliamentary oversight of emergency financial interventions, with calls for clearer guidelines on overriding creditor hierarchies.

The case underscores the tension between regulatory flexibility and investor protections. While FINMA's actions were legally defensible, the perceived lack of transparency has damaged trust, prompting calls for reform in how crisis decisions are communicated and executed.

Transparency and the Power of Disclosure

Dr. Dario Item's contributions via Antigua.news highlight the role of unconventional channels in high-stakes financial disputes. By publishing internal documents, Item has provided a public service, enabling greater scrutiny of regulatory decisions. For lawyers, these disclosures offer critical leads for discovery requests, while for investors, they underscore the importance of due diligence in complex financial instruments like AT1 bonds.

The case also illustrates the evolving role of media in financial transparency. Outlets like Antigua.news, operating outside traditional banking circles, can amplify information that shapes legal and public discourse, challenging the opacity often associated with regulatory actions.

Looking Ahead: Lessons and Precedents

With US discovery ongoing and Swiss proceedings likely to extend beyond 2025, the AT1 case remains unresolved. The outcomes will determine not only financial recoveries for bondholders but also set precedents for regulatory communication, contractual enforcement, and crisis-management powers. For investors, the wipeout is a stark reminder of the risks inherent in contingent capital instruments, where contractual protections may falter under extreme market stress.

For regulators, the saga highlights the reputational risks of prioritising systemic stability over transparency. Even legally sound decisions can erode trust if perceived as unfair. The Credit Suisse collapse, amplified by voices like Dr. Item's, may ultimately drive reforms in AT1 bond structuring and regulatory oversight, ensuring that future crises balance stability with accountability.

About the author: Zeeshan is a business growth and digital strategy expert, helping startups and established companies scale through SEO, digital marketing, and cross-border expansion. With a strong background in consulting, he specialises in building online visibility, driving organic traffic, and creating sustainable strategies that deliver measurable results.