UBS Group AG prevailed against two former Credit Suisse Group AG managing directors who argued their deferred-compensation certificates should not have been written down when the banks merged in 2023. UBS asked a New York state court on Wednesday to confirm arbitration decisions rejecting claims by Martin Ego and Jeffrey Jennings. Their cases are among many the Swiss bank has faced from former senior Credit Suisse bankers over contingent capital award certificates, or CCAs.
The Swiss government brokered the merger to rescue Credit Suisse, which was in danger of collapse. As part of the deal, it required UBS to write down CCAs, which Credit Suisse awarded as deferred compensation, along with $17 billion in additional tier 1 instruments, or AT1s. Ego, Jennings and other bankers argued there was no "viability event" triggering the writedown provisions, since Credit Suisse continued meeting minimum capital requirements. The arbitrator rejected that reasoning, finding that "capital adequacy" is a broad term covering a bank's ability to absorb losses and keep functioning under stress.
A different arbitrator reached the opposite conclusion in a case brought by Matt Mitchell, Credit Suisse's former global co-head of foreign exchange and precious metals trading. UBS is seeking to overturn a nearly $1 million award to Mitchell, saying it faced "an impossible choice" between disobeying the Swiss government and complying with the award. UBS has also asked a court to uphold a separate decision denying payment to former communications head Adam Gishen.
Last week, Switzerland's top court ruled that Credit Suisse bankers who lost bonuses in the rescue will not get that money back. UBS is also appealing a Swiss administrative court's decision to revoke the writedown of AT1 bonds ordered by Finma. The bank faces a wave of AT1 holder suits, and Credit Suisse's collapse followed events including the implosion of Archegos Capital Management, which cost the bank more than $5 billion.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing