What are AT1 bonds and why is Credit Suisse's $17bn wipe-out controversial?

$260bn market

Holders of $17bn of Credit Suisse’s additional tier one (AT1) bonds will have their holdings wiped out as part of the historic takeover of the bank by UBS, a move that has sparked controversy across European debt markets.

The decision came as a surprise, given unsecured bondholders traditionally rank above equity holders in the capital structure, and forced the Bank of England and EU regulators to step in with veiled disagreement to the Swiss regulator's move, in order to stem a potential market rout.  The wipe out of Credit Suisse's AT1 bonds following UBS's decision to acquire the bank marks the largest loss to date for the market in these securities, also known as contingent convertible bonds or ‘CoCos' - but what are they exactly? AT1 bonds have grown into a roughly $260bn market since their introd...