HDFC Bank Ltd., India’s largest private-sector lender, has placed two senior executives on gardening leave as part of an internal investigation into alleged mis-selling of Credit Suisse’s Additional Tier 1 (AT1) bonds. The move follows customer complaints that they were not adequately informed about the risks associated with these high-yield securities, which were written off following Credit Suisse’s merger with UBS in 2023.
The employees in question were reportedly involved in disputed trades of the AT1 bonds, which are hybrid financial instruments designed to absorb losses during financial stress. These securities offer attractive returns but rank lowest in the debt repayment hierarchy, making them particularly risky for retail investors. In India, AT1 bonds are restricted to “professional investors” with over $1 million in investable assets.
The bank’s spokesperson stated that, “with reference to the sale of Credit Suisse AT1 Bonds, the bank has not come across any instances of mis-selling till now.” However, the spokesperson declined to comment on the placement of the bankers on leave, citing confidentiality concerns. The bank emphasized its commitment to maintaining reputational integrity and addressing stakeholder concerns with utmost seriousness.
The internal probe is ongoing, and a formal report is expected to be released soon. The action taken by HDFC Bank underscores the growing scrutiny around the sale of complex financial instruments and the responsibilities of financial institutions in ensuring transparent communication with clients.
The development has sparked broader conversations in the banking sector about investor protection, regulatory oversight, and the ethical obligations of financial advisors. Industry experts suggest that the outcome of HDFC Bank’s investigation could influence future compliance practices and risk disclosures across the sector.
