The bailout fix for Credit Suisse has ignited a regulatory storm over additional tier 1 (AT1) bonds that threatens to shake the banking system to its core.

European supervisors tried to stop a rout in the market for convertible bank bonds on Monday, saying owners of this type of debt would only suffer losses after shareholders have been wiped out — unlike what happened at Credit Suisse.

Regulators in the European Union and Britain were reacting to a decisions by Swiss authorities to write off Credit Suisse’s AT1 bonds even as stockholders received shares in UBS.

In a package engineered by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs ($3.2 billion) for 167-year-old Credit Suisse Group AG and assume up to $5.4 billion in losses.

Under the UBS buyout deal, the Swiss regulator decided that Credit Suisse’s AT1 bonds with a notional value of $17 billion will be valued at zero, angering some of the holders of the debt who thought they would be better protected than shareholders in the takeover deal announced on Sunday.

In India, a similar fate awaited the AT1 bond holders in Yes Bank in 2020. Yes Bank had written down Rs 8,415 crore impacting retail investors that included senior citizens who alleged the instruments were mis-sold to them. The Yes Bank’s dues of around $1 billion dwarfs in the face of the losses of Credit Swisse investors.

The EU regulators — the European Central Bank, the European Banking Authority and the Single Resolution Board — said they would continue to impose losses on shareholders before bondholders. “This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions,” they said in a statement.

The comments helped the price of bank bonds cut losses and were echoed by the Bank of England shortly after. AT1 became popular with banks and market participants in the past decade as lenders looked for ways of building up capital to meet supervisors’ requirements without issuing equity. “Additional Tier 1 is and will remain an important component of the capital structure of European banks,” the EU regulators said in their joint statement. Credit Suisse’s AT1 bonds contained a clause allowing Swiss authorities to write them off if the bank became unviable, regardless of what happens to the shares. This clause is not typically included in EU bonds, analysts said.

The rudest shock in the rushed deal to save embattled Swiss lender Credit Suisse Group AG was reserved for the holders of the bank’s riskiest tranche of bonds. Not only did investors discover they are the only investors not getting any compensation but that the long-established practice of giving bondholders priority over shareholders in debt recovery had been turned on its head.