Japan investors bought about 140 billion yen ($1 billion) of Credit Suisse Group AG’s bonds that were written off when the Swiss bank was suddenly sold last month, Finance Minister Shunichi Suzuki said.
(Bloomberg) — Japan investors bought about 140 billion yen ($1 billion) of Credit Suisse Group AG’s bonds that were written off when the Swiss bank was suddenly sold last month, Finance Minister Shunichi Suzuki said.
It’s “regrettable” that the fallout from Credit Suisse’s woes affected investors in Japan, Suzuki said at a news briefing in Tokyo on Friday. Securities firms must make every effort to deal carefully with their customers, he added.
Investors around the globe are on the hook for losses on the 16 billion Swiss francs ($18 billion) in risky bonds, known as Additional Tier 1 notes, that were wiped out when the Swiss government brokered an emergency takeover of Credit Suisse by UBS Group AG.
In Japan, wealthy clients of Mitsubishi UFJ Financial Group Inc.’s securities venture with Morgan Stanley lost 95 billion yen on the notes, Bloomberg reported last week. Mizuho Financial Group Inc.’s clients lost more than 4 billion yen on the instruments, while Daiwa Securities Group Inc.’s customers lost less than 1 billion yen.
The Financial Services Agency determined the amount of Japanese investment in the Credit Suisse AT1 notes after checking with a range of domestic and foreign securities firms, an official from the regulator told Bloomberg.
The FSA wants brokerages to give thorough explanations to clients affected and carefully deal with any complaints, the official said, asking not to be identified in accordance with the agency’s policy. Brokerages may also need to check whether their sales processes were proper, the official added.
The regulator’s stance adds to a call by a lobby group representing Japanese brokerages urging members to clearly explain complex products to customers.
AT1 notes, also known as contingent convertible or CoCo bonds, are considered the riskiest debt sold by banks. That’s because they are designed to impose losses on bondholders or be converted into equity if a lender’s capital ratios fall below a predetermined level. Regulators can write them down as well if a bank starts to fail.
Credit Suisse’s AT1 debt was deemed worthless by Switzerland’s financial regulator, while shareholders were able to recoup some value. That upended financial tradition as equity holders are usually the first in line to absorb a struggling bank’s losses.
Switzerland’s finance watchdog is facing a handful of court challenges over the decision, Bloomberg reported on Thursday.
–With assistance from Taiga Uranaka.
(Updates with FSA official’s comments in the fifth and sixth paragraphs)
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