Question

$250 Topics: Banks, Bank Capital Requirements Summary: Credit Suisse Group AG's emergency merger with UBS Group AG will wipe out the bank's riskiest bonds, rattling investors in the quarter-trillion-dollar market for similar bank debt. About 16 billion Swiss francs, or about $17.3 billion, of the bank's additional tier 1 bonds will be completely written down, Switzerland's financial regulator, Finma, said in a Sunday statement. Credit Suisse also said it was informed by Finma that the bonds would be "written off to zero." Questions: • What are AT1 bonds? • Why have banks liked issuing them? • Why have investors liked buying them? What is unusual about the Credit Suisse AT1s being written off? 

          $250 Topics: Banks, Bank Capital Requirements
Summary: Credit Suisse Group AG's emergency
merger with UBS Group AG will wipe out the
bank's riskiest bonds, rattling investors in the
quarter-trillion-dollar market for similar bank debt.
About 16 billion Swiss francs, or about $17.3
billion, of the bank's additional tier 1 bonds will be
completely written down, Switzerland's financial
regulator, Finma, said in a Sunday statement.
Credit Suisse also said it was informed by Finma
that the bonds would be "written off to zero."
Questions:
• What are AT1 bonds?
• Why have banks liked issuing them?
• Why have investors liked buying them?
What is unusual about the Credit Suisse
AT1s being written off?
Show more…
250 Topics: Banks, Bank Capital Requirements Summary: Credit Suisse Group AG's emergency merger with UBS Group AG will wipe out the bank's riskiest bonds, rattling investors in the quarter-trillion-dollar market for similar bank debt. About 16 billion Swiss francs, or about17.3 billion, of the bank's additional tier 1 bonds will be completely written down, Switzerland's financial regulator, Finma, said in a Sunday statement. Credit Suisse also said it was informed by Finma that the bonds would be "written off to zero." Questions: • What are AT1 bonds? • Why have banks liked issuing them? • Why have investors liked buying them? What is unusual about the Credit Suisse AT1s being written off?

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Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
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Credit Suisse Group AG's emergency merger with UBS Group AG will wipe out the bank's riskiest bonds, rattling investors in the quarter-trillion-dollar market for similar bank debt. About 16 billion Swiss francs, or about $17.3 billion, of the bank's additional tier 1 bonds will be completely written down, Switzerland's financial regulator Finma said in a Sunday statement. Credit Suisse also said it was informed by Finma that the bonds would be "written off to zero.
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00:01 So for problem 8, we are asked to predict what will happen to interest rates on corporate bonds if the federal government guarantees today that it will pay credits if the corporation goes bankrupt in the future.
00:17 And we are asked what will happen to the interest rates on treasury securities.
00:23 So the government's guarantee will significantly reduce the default risk of the corporation.
00:30 This will increase the corporate bond demand and possibly reduce the demand for treasury securities.
00:38 And since the price of a bond is equal to the coupon rates divided by the interest rates, the increased demand for corporate bonds will decrease their interest rates, as bond price is indirectly related to interest rates...
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