Sergio Ermotti, CEO of UBS gestures during a panel discussion at the Swiss-American Chamber of Commerce in Zurich, Switzerland January 18, 2019.

Arnd WIegmann | Reuters

UBS Group CEO Sergio Ermotti says the “incredible” market demand for the bank’s recent issuance of AT1 (additional tier one) bonds is a “signal to the Swiss banking system.”

The Swiss lender last week began selling the bonds — which were at the heart of controversy during its emergency rescue of Credit Suisse earlier this year — for the first time since the takeover.

Ermotti told CNBC on Wednesday that he was “more than encouraged” by the massive oversubscription received for last week’s return to the market.

“The AT1 demand was incredible — $36 billion of demand for what happened to be $3.5 billion of placements — and in my point of view, it was probably the highlight in a sense of the confidence is restoring not only for UBS, I would say also it is a signal to the Swiss financial system,” Ermotti said.

The wipeout of $17 billion of Credit Suisse AT1 bonds in March, which was part of the rescue deal brokered by Swiss authorities, caused uproar among bondholders and continues to saddle the Swiss government and regulator with legal challenges. Some commentators suggested that it had undermined confidence in the traditionally stable and reliable Swiss banking system.

“The first reactions were based on emotions or people that were very loud because they had their own interest, but I think that, as time went by, people had enough chances to really look at the idiosyncratic situation, and also probably look more carefully into the prospectus of what is written,” Ermotti told CNBC’s Joumanna Bercetche on the sidelines of the UBS Conference in London.

“Those bonds were designed to be there for those kind of situations so I think that people over time, or the vast majority of the people, are coming down to a more balanced way of looking at matters,” he added.

Original: Finance: UBS boss Ermotti says ‘incredible’ bond demand is ‘a signal to the Swiss banking system’