The creditors of Credit Suisse (CS) have achieved an important milestone victory in one of the most significant financial law cases of recent years. On 1 October 2025, the Federal Administrative Court ruled that the write-off of CHF 16.5 billion in Additional Tier 1 (AT1) bonds ordered by the Swiss Financial Market Supervisory Authority FINMA was unlawful.
The write-off took place in March 2023 in the course of the takeover of CS by UBS. It was based on an emergency ordinance issued shortly before by the Federal Council, which granted FINMA far-reaching powers of intervention, including the authority to write off the bonds in full. For the holders of the AT1 bonds – institutional investors, pension funds and private individuals – this meant a total loss. Around 3,000 affected parties subsequently lodged complaints with the Federal Administrative Court.
The court concluded that the conditions for a write-off had not been met. The bond contracts only provided for such a step in the event of a so-called ‘viability event’, a situation in which a bank would be immediately insolvent without state aid. In the court’s opinion, this was not the case with CS: it remained sufficiently capitalised, and the funds granted by the federal government and the National Bank served to secure liquidity, not to strengthen equity capital. This meant that there was no contractual basis for the intervention.
Furthermore, the court found that there was also no sufficient legal basis for the write-off. The intervention violated the guarantee of property rights, as neither the Banking Act nor the Financial Market Supervision Act authorise FINMA to revoke creditor rights without compensation. In the court’s view, parts of the Federal Council’s emergency ordinance exceeded the limits of permissible emergency law and were therefore unconstitutional.
FINMA has announced that it will appeal the ruling to the Federal Supreme Court. It remains unclear whether the written-off bonds will be reversed or whether creditors will be compensated. However, a restoration of the bonds is considered unlikely. Observers assume that financial compensation is more likely. It remains unclear whether this would have to be paid by the federal government or by UBS. Many experts are of the opinion that UBS cannot be held liable on grounds of protection of legitimate expectations.
Conclusion
The ruling represents a milestone in the conflict between financial market supervision, emergency law and the guarantee of property rights. If it is upheld by the Federal Supreme Court, it is likely to have far-reaching consequences for the handling of hybrid financial instruments and future crisis interventions by the federal government.
