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Swiss court says 16.5 billion Swiss francs bond write-off in Credit Suisse rescue was unlawful

Swiss court says 16.5 billion Swiss francs bond write-off in Credit Suisse rescue was unlawful

By Swedan Margen

Fashion

A Swiss court on Tuesday (Oct 14) said the Swiss financial market regulator’s 2023 decision to write off 16.5 billion Swiss francs (S$26.7 billion) worth of Credit Suisse bonds was unlawful, throwing up questions about potential liability.

The decision made by regulator Finma to wipe out Credit Suisse’s Additional Tier one (AT1) bonds during the bank’s emergency takeover by its old rival UBS in March 2023 triggered an investor backlash and legal challenges.

The partial decision by Switzerland’s Federal Administrative Court said Finma’s decision 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.

The decision can be appealed at the country’s top court.

The Swiss government and Finma both said they would analyse the administrative court’s decision. UBS declined to comment.

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UBS, which is the largest wealth manager outside the US, has previously struggled to expand in the world’s largest economy.

The 2023 write-down stunned markets by prioritizing shareholder compensation over bondholder claims – upending the traditional capital hierarchy and shaking confidence in the AT1 market.

AT1 bonds, introduced after the 2008 financial crisis, are designed to absorb losses in times of stress. While their terms allow for write-downs under certain conditions, investors argued that Finma’s action violated expectations and contractual norms. REUTERS

Originally published by businesstimes.com.sg. Syndicated material does not necessarily reflect the views of Grazia British.

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