Landmark Decision: Court Rules Credit Suisse Bond Wipeout Was Unlawful
In a stunning rebuke to Switzerland’s financial regulators, the Federal Administrative Court has ruled that the forced write-off of Credit Suisse’s AT1 bonds – worth 16.5 billion francs – during the bank’s emergency takeover by UBS had no legal basis, Swiss daily «Tages-Anzeiger» reports. The landmark decision could have far-reaching implications for investors and the Swiss state alike.
When the Swiss government orchestrated the rescue of Credit Suisse by UBS on March 19, 2023, regulators simultaneously ordered the total write-off of the bank’s Additional Tier 1 (AT1) bonds.
The move wiped out 16.5 billion francs in investor capital overnight – even as Credit Suisse shareholders received UBS stock. The decision, justified under emergency powers, triggered outrage among global bondholders.
Thousands of Investors Took Legal Action
Roughly 3,000 bondholders challenged the Financial Market Supervisory Authority’s (Finma) order in more than 360 separate lawsuits before the Federal Administrative Court (BVGer).
They argued that neither Swiss law nor the contractual bond terms justified the total loss. Their central claim: the government and Finma had overstepped their legal authority in invoking emergency measures.
Court Strikes Down the Finma Order
In its first partial ruling, the BVGer sided with investors, declaring the Finma decision of March 19, 2023, invalid.
The court confirmed that the plaintiffs had legal standing and found that the conditions for a so-called «viability event» – which would have allowed an AT1 write-down – were not met. Other cases remain suspended until the ruling becomes final.
Credit Suisse Was Still Solvent
According to the court, Credit Suisse was adequately capitalized at the time of the write-off and met all regulatory capital requirements.
The liquidity backstops provided by the Swiss government and the central bank did not amount to a capital shortfall under the bond terms. In short, the court concluded, the bank was not insolvent when the bonds were erased.
A Violation of Property Rights
The judges further held that Finma’s action constituted a serious interference with property rights that would have required an explicit legal basis – which did not exist.
The ruling underscores that even in times of financial crisis, regulators must act within clear statutory limits. The decision is not yet final and can still be appealed to the Federal Supreme Court.
Market and Political Repercussions
Finma said it would analyze the verdict before commenting. UBS declined to comment, while the Swiss finance ministry also remained silent, noting that it was not a party to the case.
UBS shares dipped slightly following news of the ruling – a sign that investors are weighing the potential fallout of what could become one of Switzerland’s most consequential financial-law decisions in decades.
