Coverage: weekly note · Information to 8 June 2026
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TGB Weekly Research Note · 8 June 2026
A BIS working paper published on 5 June 2026 finds that after Credit Suisse, bail-in spreads tightened across Europe while senior spreads stayed flat, with the largest relief going to lower-rated euro area and UK banks.
The desk view
The Credit Suisse failure of March 2023 was the first major test of the resolution framework for global systemically important banks, and authorities chose a publicly backed takeover over a prepared bail-in. A BIS working paper published on 5 June 2026 reads the consequences from bond prices at 94 European banks. Its central finding is that bail-in spreads tightened in every jurisdiction studied while senior spreads stayed flat, so markets changed their view of how losses would be shared rather than of whether banks would fail. Lower-rated euro area and UK banks gained most, and bail-in and senior bondholders reacted less to earnings news. Our reading is that part of the cheaper bail-in funding since Credit Suisse reflects a perceived public backstop, which is a weaker foundation for funding costs than balance-sheet strength.
A resolution plan that was not used
The resolution framework for global systemically important banks had been more than a decade in the making when Credit Suisse failed in March 2023. A resolution plan was in place: it provided for writing down equity and AT1 and converting bail-in bonds into new share capital, and the paper cites the Swiss Federal Council's confirmation that the restructuring option was ready for implementation. Authorities instead facilitated a takeover by UBS backed by public guarantees. Credit Suisse AT1 bonds of roughly CHF 16 billion in nominal value were written down in full, and the government gave UBS a CHF 9 billion second-loss guarantee on losses beyond the first CHF 5 billion borne by UBS. Bail-in creditors were left whole.
Bond prices had anticipated the opposite outcome. In the days before the merger weekend, Credit Suisse AT1 and bail-in spreads rose to around 25 and 21 percentage points, against about 8 for senior debt; once the merger was announced, bail-in spreads fell to 7–8 percentage points.
On 20 March 2023 ECB Banking Supervision, the Single Resolution Board and the European Banking Authority said common equity absorbs losses first and only after its full use would AT1 be written down. The Bank of England said on the same day that AT1 ranks ahead of CET1 and behind Tier 2 in the UK hierarchy.