What the AT1 Ruling Reveals About the Credit Suisse Rescue

What the AT1 Ruling Reveals About the Credit Suisse Rescue

On 78 pages, the Federal Administrative Court paints an unusually vivid picture of the dramatic days in which Credit Suisse collapsed. The ruling reveals how tightly politics, the regulator, and UBS were intertwined during this state of legal emergency – and how the rule of law was compromised.

The judgment of October 1, 2025 (PDF of the ruling) is being hotly debated. finews.asia already reported on the new developments: the court annulled FINMA’s order of Sunday, March 19, 2023 – under which all of Credit Suisse’s AT1 bonds were written down – assuming it was unlawful.

Less attention has so far been paid to the court’s detailed findings on the inner workings of those days when Credit Suisse unraveled: the processes inside the bank, how the authorities operated, and the shifting role of UBS, which emerged as the winner. finews.ch documents the most interesting passages in the original wording.

1. The Federal Council and FINMA acted unlawfully

In large parts, the Federal Administrative Court’s decision reads like a vote of no confidence in the government crisis managers of March 2023.

The court finds that FINMA’s write-down order had no solid legal basis – neither in the offering prospectus, nor in statute, nor in the Federal Council’s emergency ordinance: «It follows that the AT1 order of March 19, 2023 has neither a basis in the contract between CSG AG [Credit Suisse Group AG] and the AT1 creditors, nor a basis in statutory law … nor a basis in the PLB-NVO [the Federal Council’s Public Liquidity Backstop emergency ordinance] … and must therefore be considered unlawful.»

The court also concludes that the much-cited emergency ordinance used by the Federal Council in March 2023 to pave the way for the AT1 write-down was unconstitutional. Central Article 5a – inserted on March 19, 2023, at 8 p.m., which gave FINMA the power to write down AT1 bonds, exceeded the Federal Council’s authority: «In this respect, Art. 5a PLB-NVO proves to be unconstitutional.»

2. FINMA shares responsibility for the design flaws in AT1 bonds

The court explains that the defect in the AT1 write-down did not originate in March 2023, but years earlier when FINMA approved the bonds’ terms. The first AT1 issues date back more than a decade.

The court recalls the regulatory architecture in the Capital Adequacy Ordinance (ERV). For a bond to qualify as Additional Tier 1 (AT1) capital, its terms must specify the events that trigger a write-down – the so-called Point of Non-Viability (PONV).

The ordinance requires «that AT1 instruments must be written down upon the occurrence of a contractually defined event (a ‘trigger’), but at the latest when the Common Equity Tier 1 (CET1) ratio falls below seven percent …» Such a reduction must occur «at the latest before recourse to public support or when FINMA orders it to avoid insolvency.»

Thus, the ordinance sets a broad legal framework: in principle, FINMA may order a write-down as soon as it deems it necessary to avoid insolvency.

However, the supervisor is obliged in advance to ensure that these conditions appear in the bond prospectuses: «Before the issuance of the AT1 instruments in question, FINMA must in particular approve the write-down event defined in the contractual terms.»

That approval became the real problem in the Credit Suisse case.

The formulation FINMA accepted in the prospectus diverged in substance from the legal template. The contractual terms defined «Viability Event Type B» as follows: «The Regulator has notified CSG that it has determined that a write-down … is, because customary measures to improve its capital adequacy are at the time inadequate or unfeasible, an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay its debts …»

In other words, Credit Suisse introduced an additional condition not found in the ERV – and one that raised the write-down threshold for investors: a write-down would be permissible only if «customary capital-enhancing measures are inadequate or unfeasible.»

No such restriction exists in the ERV. The ordinance allows FINMA to order a write-down whenever it deems it necessary to avoid insolvency, without first proving that all other means have failed.

The court sums this up unequivocally: «It is undisputed that Clause 7(a)(iii) of the AT1 contractual terms does not comply with the requirements imposed by the Capital Adequacy Ordinance on such terms, and that the definition of Viability Event Type B in the contractual terms is narrower than that in Article 29(2)(a) ERV.»

This wording narrowed the statutory mechanism: whereas the ERV allows FINMA to determine the PONV on its own in a crisis, the Credit Suisse clause tethered the write-down to an extra condition that the court finds was not met here.

In short, FINMA approved a prospectus with a write-down trigger narrower than the law, and later ordered a write-down that was not justified under that narrower clause.

3. The AT1 issue caught a sinking CS flat-footed

The decision offers a vivid account of how Credit Suisse dealt with FINMA in the final hours before the bank’s emergency takeover by UBS.

Emails show that on the afternoon of March 19, 2023, the bank tried to prevent the AT1 write-down.

At 4:24 p.m., Credit Suisse emailed FINMA. The wording – quoted in the ruling – leaves no doubt about the urgency and element of surprise: «We strongly urge you to reconsider and abstain from any determination of the occurrence of a ‹Viability Event› under the AT1 instruments of CSG.»

The bank argued there was no capital shortfall, only a liquidity problem; the planned merger with UBS was meant to secure «confidence and liquidity,» not to bolster capital.

FINMA was unmoved. At 6:24 p.m., it replied that it would «order the triggering of the write-down.» Twenty minutes later, Credit Suisse formally demanded an official order (Verfügung). At 10:01 p.m., FINMA issued that order, obliging CS to write down the AT1 bonds and notify holders, which it did on March 20.

That same Monday – after the emergency merger was announced – the bank turned to its Contingent Capital Awards (CCA), variable compensation instruments for senior staff linked in value to the AT1s. It asked FINMA «to confirm that the Contingent Capital Awards (CCA) are not covered by the order of March 19, 2023.»

Three days later, FINMA issued a second order stating explicitly «that the CCAs, as set out in the reasoning, are covered by the order of March 19, 2023,» and thus would also be wiped out.

Credit Suisse sought interim relief at the Federal Administrative Court only against this second order – not against the AT1 write-down itself – and withdrew that request on May 9, 2023.

On Sunday evening, the bank fought the write-down of its bonds; by Monday it was already seeking exceptions for bonus instruments. Soon after, it abandoned any challenge.

The timeline suggests Credit Suisse was unprepared for the write-down order.

Next page: UBS’s dual role in the proceedings – and what the court says about Karin Keller-Sutter’s public statements during the rescue.

4. UBS’s dual role as beneficiary and legal successor

The Credit Suisse email to FINMA on the afternoon of March 19 shows that the then-management apparently felt obliged, in the final hours, to protect bondholder interests.

«A FINMA determination of a Viability Event … would constitute a gift of approximately 16 billion francs to the shareholders of the acquiring party. This is currently putting the entire transaction at risk,» it wired to Bern.

Once the write-down was executed, the bank became passive in the face of faits accomplis. It did, however, secure party status in bondholder proceedings – laying the groundwork for UBS to later appear alongside FINMA as a respondent.

The merger closed on June 12, 2023. UBS thus assumed a dual role: beneficiary of the write-down, which delivered an accounting relief of around 16.5 billion francs – and legal successor to the bank that had, shortly before, tried to defend bondholder interests.

«The respondent [i.e., UBS] benefits, as legal successor to the addressee of the order [i.e., CS], from the write-down of the AT1 capital instruments ordered by the lower instance to the extent that the complainant creditors lose their claims (i.e., a profit of approximately 16.5 billion francs).»

UBS combined two incompatible roles: a beneficiary of a decision that yielded billions, and the successor to a bank that initially tried to prevent that very decision.

UBS could have remained neutral – mindful of Credit Suisse’s inherited legal posture vis-à-vis FINMA – and left the legal battle largely to bondholders and the supervisor.

Instead, the big bank chose a different path, throwing its legal weight behind FINMA and energetically defending the lawfulness of the write-down.

The court expressly notes UBS’s active engagement: «Moreover, based on its conduct in the proceedings, it is obvious that not only the complainants, but also the respondent [UBS] attach significant importance to the question of the lawfulness of the contested order.»

Whether UBS’s offensive strategy will hold over time remains to be seen as the case progresses.

5. Limits of emergency powers in bank rescues

A central theme of the ruling is the relationship between ordinary law and the Federal Council’s emergency powers.

In the court’s view, the Federal Council and FINMA overstretched the statutory framework in March 2023.

The starting point was the emergency ordinance on support measures for Credit Suisse, issued by the Federal Council on March 19, 2023.

Article 5a – inserted retroactively – stated that FINMA could «order the full or partial write-down of Additional Tier 1 capital.»

This provision was used as the legal basis for the AT1 order late on March 19.

The court holds that this emergency law was not constitutional because it was enacted in an area already governed by legislation – namely the too-big-to-fail framework, which sets out in detail the approach to resolving systemically important banks.

The court recalls that emergency powers under the Federal Constitution are intended only for unforeseen situations not addressed by the legislature.

However, «Since 2008, with the too-big-to-fail regulation, the legislature has anticipated crisis scenarios for systemically important banks and addressed them. A ‹bank run›, i.e., a rapid and unpredictable loss of customer confidence, is not a new phenomenon but part of a bank’s inherent business risk.»

Accordingly, there was no room for the Federal Council to act unilaterally via emergency ordinance. It is «not at the Federal Council’s discretion to set aside a solution crafted by the democratic legislature precisely for such cases.»

If this view is upheld by the Federal Supreme Court, it would be a turning point: the room for maneuver of the Federal Council and FINMA in future banking crises would narrow significantly.

6. Karin Keller-Sutter’s explosive statement

In the hectic hours of March 19, 2023, Federal Councillor Karin Keller-Sutter told the media: «This is not a bailout. This is a commercial solution.»

The court picks up on this because it directly contradicts the rationale FINMA used for the AT1 write-down.

The supervisor had justified its order on the basis that state-provided liquidity facilities and loss guarantees amounted to «public support» within the meaning of the ERV.

The court scrutinized this reasoning – and reached the opposite conclusion.

It also cited Keller-Sutter’s statement as evidence that resorting to emergency law was not justified: «In the present case, the merger is … a legal transaction between two private-law entities.» And further: «Ultimately, resorting to emergency ordinance law – despite existing applicable statutory law – in order, within the framework of a private-law transaction («commercial solution»), to protect the interests of one party is not covered by Art. 184(3) or Art. 185(3) of the Constitution [the emergency-powers provisions].»

If it truly was a «commercial solution,» the legal basis for state and regulatory intervention to write down the AT1 bonds falls away.

As finews.ch already reported, it remains quite possible that the generally more state-minded Federal Supreme Court will find ways to qualify – or even overturn – the lower court’s carefully balanced reasoning.

Even so, the judges deserve credit for opening a rare window into the legal and institutional fault lines of the emergency merger.