Controversial at the time, the "shotgun" wedding between the two Swiss banks involved the write-down of AT1 bonds – a form of capital designed to absorb losses. This prompted legal claims from affected investors. This week, a Swiss court gave investors a glimpse of possible success.

Credit Suisse bondholders seeking recompense after their investments were wiped out in the UBS emergency takeover might achieve a successful campaign – although further legal obstacles must be overcome. 

A Swiss court has ruled, in a test case, that complainants had a right to appeal the matter.

A group of 3,000 investors had claimed that the UBS emergency takeover of Credit Suisse in March 2023, carried out at the behest of Swiss authorities, was unlawful. Some SFr16.5 billion ($20.7 billion) of additional tier 1 (AT1) bonds were written down at the time. UBS bought its Zurich-listed rival for SFr3 billion, which in some quarters is seen as cheap. Yet Credit Suisse AT1 bondholders were wiped out, provoking the ire of several asset managers. (See examples here and here.) 

On 1 October, the Swiss Federal Administrative Court (FAC) ruled on one of those as a test case, supporting those complainants’ right to appeal and revoking the decree. A statement from the tribunal was issued on Tuesday this week. 

However, the road towards possible compensation is uncertain. The Swiss Financial Market Supervisory Authority FINMA said it will contest the judgment and appeal to the Federal Supreme Court. “The write-down was part of an overall package to stabilise Credit Suisse via a merger with UBS, for which extraordinary state support measures were necessary,” FINMA said in a statement. 

Was this lawful?
The court said it examined whether there was a statutory basis for the write-off order. 

“It considered that the bondholders’ property rights were seriously interfered with, which would have required a clear and formal legal basis. But no such basis existed: Article 26 BankA, which provides for protective measures in the event of an impending insolvency, addresses a different subject matter and, in any event, it is too vague to be relied upon for a write-off of third-party rights under the principle of legality,” the court said.

UBS declined to comment to WealthBriefing on the matter. 

The emergency takeover of Credit Suisse, coming after a string of mishaps and scandals that had hit the bank’s shares, leaves Switzerland with one universal bank. The saga dented the Alpine state’s reputation for financial solidity. 

There is speculation whether UBS or the Swiss government will have to recompense bondholders.

The Court said details on the emergency takeover of Credit Suisse appear to flout constitutional law. 

“Since the decree of 19 March 2023 is based on the Emergency Ordinance, the FAC also examined its constitutionality on a preliminary basis. Article 5a of the Emergency Ordinance proved unconstitutional in several respects, namely because it violates constitutional requirements in relation to emergency ordinances by the Federal Council (Articles 184(3) and 185(3) of the Federal Constitution, FC), to the delegation of expropriation rights (Article 178(3) FC), as well as to the guarantee of ownership (Article 26 FC),” it said. 

UBS is scheduled to issue third-quarter 2025 results on 29 October.