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Introduction
As mentioned in an article in the FuW: The write-off of Additional Tier 1 (AT1) bonds issued by Credit Suisse remains one of the most controversial aspects of the bank's emergency rescue in March 2023.
During the government-brokered takeover of Credit Suisse by UBS, the Swiss Financial Market Supervisory Authority (FINMA) ordered the complete write-down of AT1 bonds with a nominal value of approximately CHF 16 billion.
The decision triggered numerous legal challenges by investors. Following a recent ruling by the Swiss Federal Administrative Court, the dispute has now reached the Swiss Federal Supreme Court, which will ultimately decide whether FINMA's intervention was lawful.
Background of the dispute
AT1 bonds are hybrid capital instruments introduced after the global financial crisis to strengthen bank resilience. They are designed to absorb losses in crisis situations and form part of the Basel III regulatory framework.
In the Credit Suisse rescue, FINMA ordered a complete write-down of these instruments as part of the emergency measures supporting the UBS takeover.
The measure proved controversial because shareholders received compensation in the takeover transaction while AT1 investors were fully wiped out, prompting investors to challenge the legality of the decision.
Federal Administrative Court ruling
In October 2025, the Swiss Federal Administrative Court issued a significant decision in a lead case. The court concluded that the FINMA order lacked a sufficient legal basis under Swiss law.
The ruling raised the possibility that the write-down may have been unlawful. However, the judgment is not yet final.
FINMA and UBS subsequently filed appeals, bringing the case before the Swiss Federal Supreme Court.
Current procedural status
The Federal Supreme Court has already addressed an important procedural question.
It granted suspensive effect to the appeal, meaning that the Federal Administrative Court's decision does not take effect for the time being. As a result, the AT1 bonds remain written down and without value until the Court issues a final ruling.
A final judgment is not expected immediately.
Potential implications
The forthcoming decision could clarify several key issues in Swiss banking and financial market law:
- the scope of FINMA's intervention powers in bank crisis situations;
- the legal treatment of AT1 capital instruments in resolution scenarios;
- the potential liability of the Swiss Confederation or regulatory authorities.
Given the global importance of AT1 instruments in bank capital structures, the outcome of the case is being closely monitored by investors and regulators worldwide.
Conclusion
The Credit Suisse AT1 litigation is likely to become a landmark case in Swiss financial regulation. The Federal Supreme Court's decision will determine whether the write-down of CHF 16 billion in AT1 bonds was legally justified and may shape how similar crisis interventions are handled in the future.
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