The Swiss Federal Administrative Court has ruled that the forced write-off of Credit Suisse’s Additional Tier 1 (AT1) bonds during the bank’s 2023 rescue lacked a legal basis and must be annulled — a decision that upends the official narrative of a crisis weekend and reopens fundamental questions about Switzerland’s emergency powers and investor protections.
On 1 October 2025, the court issued a partial decision in case B-2334/2023, revoking FINMA’s 19 March 2023 decree that zeroed out roughly CHF 16.5 billion of Credit Suisse AT1s as part of the UBS takeover. The ruling stems from around 360 appeals filed by roughly 3,000 investors; the court confirmed their standing to sue.
The trigger that never was
AT1 “write-off bonds” can only be wiped when a contractually defined “viability event” occurs. The court found that, at the time of the wipeout, Credit Suisse was sufficiently capitalized and met regulatory capital requirements; the government and central bank measures were aimed at shoring up liquidity, not replenishing capital — and therefore did not trigger the contractual write-off mechanism.
An emergency decree on unconstitutional ground
The judges also dismantled the state’s legal scaffolding. They concluded that FINMA’s order constituted a serious intrusion on bondholders’ property rights and lacked a “clear and formal” statutory basis. Article 26 of the Banking Act and Article 31 of the FINMA Act did not suffice, and Article 5a of the Federal Council’s emergency ordinance — added on the very day of the rescue — was unconstitutional on multiple counts, including separation-of-powers limits and the constitutional guarantee of property.
The paper trail: Credit Suisse warned FINMA
A contemporaneous email entered into the record shows Credit Suisse pleaded with the supervisor hours before the wipeout, arguing the contractual requirements for a write-down were not met and that the measures on the table addressed liquidity, “not capital.” The bank also warned that equity created by declaring a viability event was “not priced in the valuation of the deal” and would amount to “a gift of ca CHF 16bn to the shareholders of the acquiring party.”
What the ruling does — and doesn’t — do (yet)
The judgment annuls FINMA’s 19 March 2023 decree, but the court has not yet decided whether to reinstate bondholder claims or order other remedies. The remaining cases are stayed until this partial decision becomes final, and Switzerland’s Federal Supreme Court may still be asked to rule.
What’s really at stake
Legitimacy of the crisis playbook
Switzerland’s authorities stitched together an unprecedented rescue over a single weekend. The court’s finding that the key emergency tool — a same-day ordinance add-on — was unconstitutional cuts to the heart of how far the executive can go in a banking panic. Even more striking, the clause enabling the wipeout (Article 5a) was later repealed; the court’s view suggests it should never have been used to erase private claims.
Contract versus command
AT1s were sold on the premise that losses would be imposed according to contract triggers. The court’s message is clear: contract terms matter — and in this case, liquidity backstops did not equal a capital failure. If this reasoning stands, it reshapes the hierarchy of creditor expectations in Swiss crisis management.
A potential liability time bomb
By voiding the legal basis for the write-off, the court has opened the door to restitution or compensation debates. If the decision ultimately favors investors, who pays? UBS, which benefited from the deletion of debt? The state? Or both? The partial ruling keeps all these questions alive.
FINMA under the microscope
Supervisors act decisively in a panic; courts demand legality afterward. The record shows Credit Suisse itself warned that imposing losses in a liquidity — not capital — crisis contradicted the “plain wording” of bond clauses and risked damaging trust in AT1 instruments. FINMA’s judgment during the crisis will now be scrutinized on appeal.
What to watch next
Appeal posture
The decision is appealable to the Federal Supreme Court. Expect disputes over whether liquidity support equals capital impairment, how AT1 prospectus language should be interpreted, and constitutional limits on emergency power.
Remedies and valuation
If reinstatement is considered, how are coupons, accrued interest, suspended trading, and post-wipeout transactions managed? If compensation is considered, who bears the cost — and under what legal theory?
Policy overhaul
The ruling effectively invites Parliament to create a formal framework for imposing losses in bank resolution — one that doesn’t rely on improvised emergency clauses drafted during a crisis weekend.
