The Federal Administrative Court of Switzerland ruled on Tuesday that writing off 16.5 billion Swiss francs ($20.53 billion USD) in Credit Suisse bonds was unlawful, calling into question the government’s approach to handling banking crises. 

Credit Suisse, a global Swiss bank, collapsed in March 2023, triggering a response from the Swiss Financial Market Supervisory Authority (FinMA). As part of their rescue plan, FinMA authorized rival bank UBS to take over Credit Suisse activities, and ordered the write-off of 16.5 billion Swiss francs of Additional Tier 1 (AT1) bonds to sweeten the deal.

The government-engineered rescue deal allowed this transition on all fronts, with the Federal Council of the Swiss government issuing an emergency ordinance in 2023 and then amending the ordinance to add Article 5a, which gives FinMA the authority to write down AT1 bonds. AT1 bonds are designed to absorb losses if a bank’s capital drops below a set trigger point, or in a contractually predefined viability event, either by writing off or reducing the value of the loan given by bondholders to the bank. In addition, FinMA still allowed shareholders to receive some value through UBS shares. This means that shareholders got paid before bondholders, which goes directly against the financial hierarchy of payouts in cases of collapse or bankruptcy, according to Swiss law and common insolvency practice. 

The court ruled that dissolving the AT1 bonds was unlawful and lacked a legal basis, partially revoking the 2023 write-off order. In a press release from the court, they confirmed that over 3,000 people submitted complaints to appeal against FinMA’s order. The court found that the conditions for a write-off were not fulfilled because the contractual event that FinMa relied on had, in fact, not been triggered when the write-off was ordered. The court found that as of March 2023, Credit Suisse was sufficiently capitalized and met regulatory capital requirements. Also, the court noted that Article 5a of the emergency ordinance was unconstitutional because it failed to follow the proper requirements in relation to emergency ordinances.  Just two weeks before the court’s ruling, the Swiss Federal Council published a new law on October 1, 2025, defining FinMa’s powers in viability events and clarifying the payout structure for AT1 bondholders, who will have priority over shareholders at Articles 39 to 41 subsection 2.

In response, FinMa issued a press release stating that they will appeal the decision to the Federal Supreme Court, the highest level court in Switzerland, within 30 days. They cited the Federal Council’s original Emergency Ordinance and Article 5a to justify their actions and scope of authority, doubling down that the write-offs were part of an overall plan to stabilize the bank merger and necessitated extraordinary state support.