Switzerland’s federal administrative court found that the deletion of Credit Suisse At1 Capital Instruments, as Finma ordered in March 2023, had no legal basis.
As a result, the Federal Administrative Court has revoked the Finma Decree in a partial decision.
On March 19, 2023, representatives of the Federal Department of Finance (FDF), Financial Market Supervisory Authority (FINMA), SNB (SNB) and banks involved have announced a comprehensive set of measures for the acquisition of Credit Suisse (CS) by UBS.
It included the deletion of CS total companies for Class 1 additional funds (AT1 Bonds) with a nominal price of about 16.5 billion CHF. On the same day, the Federal Council amended the recently adopted an emergency decree with a provision (Article 5A) that authorized Finma to order a bank to delete its basic capital. Acting, among other things, in this provision, in its decree and on March 19, 2023, Finma ordered CS to delete all AT1 bonds immediately and alert the corresponding counterparts, which CS did so.
About 3,000 complainants submitted appeals to the Federal Administrative Court (FAC) against this decree in approximately 360 cases. In the resulting process of diversity, these complainants participate in one and the same procedure (a decree, the same events). A peculiarity of such a procedure is that the individual right of each party to be heard extends to the submissions and evidence of all other parties, to the extent that their requests may not be granted.
In essence, the complainants requested that the decree be revoked and in addition to reversing the deletion. They claimed that there was neither contractual nor sufficient legal basis for the split of AT1 bonds. For their part, Finma and UBS mainly challenged the complainants’ right to appeal and claimed that, on March 19, 2023, the conventional terms for the split of AT1 bonds were met as well as Article 26 of Bank Law (Banka), Article 31 of the Law on Supervisory Market (Article 31) Emergency that provided sufficient basis for the legal base of the Finma.
On October 1, 2025, Facus passed partial decision in one of the resort cases. Confirmed the complainants’ right to appeal and revoke the Decree of March 19, 2023, FAC has not yet decided on the reversal request. The other cases are now suspended until the decision on the withdrawal of the decree has been final.
For regulatory purposes, AT1 Capital Instruments are part of a bank’s additional basic shares. They are usually structured either as conditional compulsory convertible bonds or, as in hand, as debt exemption bonds (“deletion bonds”). Deleting bonds can be deleted by the issue of issuing when the appearance of a conventionally “VIABILITY EVENT”. Face ruled that the conditions for deletion were not fulfilled because conventional viability had not been activated: At the time of the deletion, CS was sufficiently capitalized and met the regulatory capital requirements. The measures administered by the federal government and SNB served solely to ensure liquidity and, according to an understanding of the confidence -based newsletter, had no direct impact on the basis of the shares.
The court further examined whether there was a legal basis for the deletion order. He considered that bond rights were seriously intervening, which would require a clear and official legal basis. But there was no such basis: Article 26 Banka, which provides for protective measures in the event of imminent insolvency, is facing a different matter and, in any case, it is very vague to be based on a deletion of third -party rights in accordance with the principle of legality. The same applies to Article 31 Finmasa and Article 5a of the Federal Council emergency decree.
Since the decree of March 19, 2023 is based on an emergency decree, FAC also examined its constitutionality on a preliminary basis. Article 5a of the emergency decree has been unconstitutional in various respects, that is, because it violates the constitutional requirements in relation to emergency orders by the Federal Council (Articles 184 (3) and 185 (3) of the Federal Constitution (FC), with the authorization of the federal constitution (3). property (26 FC).
This ruling is subject to appeal to the Federal Supreme Court.
FINMA announced today that it will appeal to the federal Supreme Court within the 30 -day appeal.