The Federal Administrative Court of Switzerland recently deemed the write-off of 16.5 billion Swiss francs in Credit Suisse bonds as unlawful, prompting discussions about the Swiss government’s crisis management strategies. This decision, delivered on Tuesday, challenges the government’s earlier actions following the financial collapse of Credit Suisse, a prominent global bank, in March 2023.
Amid the chaos of the collapse, FinMA, Switzerland’s financial oversight agency, approved a rescue strategy involving UBS’s takeover of Credit Suisse. This plan included the controversial write-off of Additional Tier 1 (AT1) bonds valued at 16.5 billion Swiss francs to facilitate the merger. Uniquely designed to absorb bank losses under certain conditions, these AT1 bonds were meant to provide a cushion in the event of a significant capital downturn or viability crisis. However, when FinMA allowed shareholders to receive compensation via UBS shares, it contradicted traditional insolvency practices and Swiss law, where bondholders typically precede shareholders in payout hierarchies.
According to the court’s findings, the conditions for invoking a write-off had not been met at the time. It was determined that as of March 2023, Credit Suisse still met necessary capital requirements. The court also invalidated the government’s emergency ordinance amendment, particularly Article 5a, for failing to comply with constitutional protocols for emergency measures. The full text of the ruling is covered here.
Just prior to this decision, the Swiss Federal Council attempted to clarify FinMA’s authority through legislation introduced on October 1, 2025. This new law outlines FinMA’s powers in events threatening bank viability and reorganizes the compensation structure so that AT1 bondholders are given priority over shareholders.
Reacting to the court’s decision, FinMA announced plans to appeal to the Federal Supreme Court within 30 days, defending their actions by citing the emergency ordinance. They stressed that the write-offs were a critical component of the merger strategy aimed at stabilizing the financial landscape through extraordinary state intervention.
This ruling not only raises questions about procedural adherence and legal frameworks during crises but also highlights the contentious balance between rapid governmental intervention and protecting investor rights in complex financial scenarios. The broader implications for financial regulation and crisis management continue to unfold as the appeal process progresses.
For additional insights into the court’s decision and its potential ramifications, The Guardian also provides a detailed account.