Published by Global Banking & Finance Review®
Posted on October 14, 2025
4 min readLast updated: January 21, 2026
Add as preferred source on GoogleA Swiss court ruled Credit Suisse's $20B bond write-off unlawful, boosting bondholder hopes and questioning the authorities' rescue handling.
By Dave Graham, John Revill and Oliver Hirt
ZURICH (Reuters) -Writing off 16.5 billion Swiss francs ($20.53 billion) in Credit Suisse bonds was unlawful, a Swiss court ruled on Tuesday, boosting bondholders' hopes of recouping losses and raising fresh questions about how authorities handled the bank's rescue.
Swiss market regulator FINMA's decision in March 2023 to wipe out Credit Suisse's Additional Tier 1 (AT1) bonds during the state-engineered takeover by its rival UBS triggered an investor backlash and legal challenges.
Shares in UBS, which faces tougher banking regulations that could oblige it to hold billions of dollars in additional capital, fell by more than 3.5% following the ruling, which can be appealed at Switzerland's top court.
Analysts said the Federal Administrative Court's decision was likely to be appealed and even if legal challenges failed, investors were not guaranteed to recover the entire sum because the bonds had lost value before Credit Suisse's collapse.
"The repayment, if an appeal is unsuccessful, could be much less than the full 16 billion, as the market value of the bonds was much less than their nominal value at the time of the rescue," said Hans Gersbach, a banking and economics professor at ETH University in Zurich.
Peter V Kunz, a business law professor at the University of Bern forecast the bonds would eventually need to be re-issued once a legal process he saw lasting up to six years played out.
But the fact that actions taken by Swiss authorities had created a potential headache for UBS could win the bank sympathy in its efforts to lobby for lower capital requirements, he said.
If UBS did have to re-instate the AT1 bonds it could seek to have the government share the burden, Kunz added.
In a partial decision, the administrative court said the 2023 AT1 bond write-off lacked a legal basis.
"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," the court said.
AT1 bonds, introduced after the 2008 financial crisis, are hybrid debt instruments which banks issue to bolster their capital buffers and absorb losses in times of stress.
The Swiss finance ministry and FINMA both said they would analyse the court's decision. UBS declined to comment.
2023 DECISION LEFT MARKETS STUNNED
The 2023 write-off stunned markets by prioritizing shareholder compensation over bondholder claims, upending the normal capital structure hierarchy.
When Credit Suisse was taken over, shareholders received UBS stock valued at around $3.25 billion. AT1 holders were left with nothing, prompting lawsuits in Switzerland, the U.S., and investor-state arbitration under bilateral treaties.
Around 3,000 complainants lodged appeals with the court over FINMA's decree in about 360 cases, the court said. In essence, complainants requested that the decree be revoked, and that the write-off be reversed, it added.
The court made a partial decision in one appeal case and revoked FINMA's decree. It has not yet decided on the reversal request. The other cases are now suspended until a decision regarding the revocation of the decree has become final.
Jonas Hertner, a Zurich-based lawyer who previously represented Credit Suisse AT1 clients at law firm Quinn Emanuel, expected FINMA and UBS to appeal the decision, which he said essentially held that bondholders were expropriated.
"Under Swiss law, expropriation requires full compensation. This decision is a step to restore investor confidence in the Swiss legal system," he said.
($1 = 0.8038 Swiss francs)
(Reporting by Kirsti Knolle, John Revill, Dave Graham, Oliver Hirt and Stefania SpezzatiEditing by Louise Heavens and Alexander Smith)
Additional Tier 1 (AT1) bonds are hybrid debt instruments issued by banks to strengthen their capital base. They can absorb losses during financial stress, making them a riskier investment compared to traditional bonds.
A bond write-off occurs when a bond issuer eliminates the obligation to repay the bond, often due to financial distress or restructuring. This can result in total loss for bondholders.
The Swiss Financial Market Supervisory Authority (FINMA) regulates financial markets in Switzerland, overseeing banks, insurance companies, and stock exchanges to ensure stability and compliance with laws.
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