Who Pulls the Trigger: What the AT1 Rulings Mean for Financial Disputes
By Shiva Bavamala
Financial disputes are usually argued over numbers: valuation, losses, risk models, disclosures.¹ Two recent rulings suggest the outcome can instead turn on who was authorized to act, what the contract requires to trigger that action, and whether the steps happened in the right order.
What the rulings held
In October 2025, the Swiss Federal Administrative Court ruled that the March 2023 write-down of about CHF 16.5 billion in Credit Suisse AT1 bonds was unlawful.² The court found the "viability event" clause convoluted and ambiguous, yet upheld it, because the regulator had not required changes beforehand and investors had relied on the wording. The result is paradoxical: under the contract as written, the regulator could not write the bonds down, though it could have if the design had complied with Swiss law.
In October 2026, the Supreme Court of India ruled that the Yes Bank AT1 write-down was illegal.³ The administrator made the decision, but the regulator held the power to write down the AT1s. The court also held that the write-down should have come before the restructuring, not as part of it.
Why this matters beyond bonds
Credit Suisse's class action centered on management's statements about client outflows, control weaknesses, remediation after the Archegos losses, and the auditors' role.⁴ The Swiss ruling turned on a question those arguments did not reach: whether the contract's trigger was legally sound.
The same pattern appears across financial disputes. Documents that read as coherent to bankers, traders and risk professionals may not hold up under close legal reading.
Where these questions arise in disputes
These issues often surface in disputes where expert analysis depends on contract mechanics rather than market data alone.
Derivatives. Close-out disputes under ISDA Master Agreements turn on whether an event of default was properly designated, whether notice met the required form and timing, and how netting provisions operate. An expert modeling close-out should confirm that the assumptions match what the agreement permits.
Structured products. Payoffs depend on trigger definitions such as barrier levels, observation dates, early redemption events, and the calculation agent's role. A model can be arithmetically correct and still answer the wrong question if the trigger is unclear or the party determining it is uncertain.
Banking and financial institution disputes. Write-downs, bail-ins and conversions depend on who has authority, under which framework, and whether the steps followed in sequence. Recovery values can turn on whether the action was lawful at all.
Lending and intercreditor arrangements. Acceleration clauses set who can call a loan, after what notice, and whether a standstill applies. These mechanics drive cash-flow timing and therefore damages, yet often get less scrutiny than headline pricing.
What this means for expert analysis
Read the operative clause and map the authority. Check each defined term against the enforceable conditions, not a summary of them. For each event in the model, identify which party held the power to act under the contract and the law, and confirm that the party did act.
Build the sequence and test the alternatives. Notice periods, cure rights and the order of steps can change both timing and entitlement. Build a dated timeline from the record. Where a clause could reasonably be read two ways, run the valuation under each reading and show the spread.
Separate legal assumptions from the economics. Keep a written list of every assumption that depends on interpretation or authority, and note whether counsel or the tribunal will resolve it. This marks where the analysis ends and the legal question begins.
Raise ambiguity with counsel early. Unusual definitions and mechanics are easier to address before the report is final. Flagging them is part of the work, even though the interpretation is not the expert's to give.
Conclusion: what this means for testimony
Experts are rarely asked what a contract means, but every damages model embeds legal assumptions. A model that assumes a trigger fired, a payment was due or an action was authorized rests on a legal conclusion, whether or not the report says so.
The Credit Suisse and Yes Bank decisions show that financial disputes can turn on something other than valuation, risk or accounting. The decisive question may be whether the contractual trigger was exercised by the right party, at the right time, and in the manner the law requires. Before quantifying damages, experts should confirm that the assumptions behind them can withstand that scrutiny. Checking those assumptions early, before positions harden, is the most effective way to protect the numbers.
Sources
The opinions, views, and statements expressed in this article are solely those of the individual authors and do not represent, reflect, or constitute the views or opinions of SEDA Experts.
EXPERT INVOLVED
Shiva Bavamala - Managing Director
Shiva Bavamala has more than 24 years of experience in finance and banking, specializing in market risk, counterparty risk, credit derivatives, OTC markets, OTC derivatives, and advanced financial modelling. He is the former Head of European Corporate Credit at Barclays Bank and has held senior roles across global financial institutions.
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