4. UBS’s double role as beneficiary and legal successor

The email from Credit Suisse to Finma on the afternoon of 19 March shows that the bank’s management still felt an obligation to protect its bondholders’ interests in its final hours.

«A Finma determination of a Viability Event […] would constitute a gift of ca. CHF 16 bn to the shareholders of the acquiring party. This is currently putting the entire transaction at risk,» the message read.

After the write-down was executed, the bank became passive — but retained party status in the bondholders’ legal proceedings, laying the groundwork for UBS to later join the case alongside Finma as the respondent.

When the merger closed on 12 June 2023, UBS inherited a double identity: as the chief beneficiary of the write-down, which delivered an accounting gain of roughly CHF 16.5 billion, and as the legal successor to a bank that had initially tried to prevent it.

«The respondent [UBS] benefits as the legal successor of the addressee of the order [Credit Suisse] from Finma’s write-down decision to the extent that the complainants, as affected creditors, lose their claims (i.e. a profit of approximately CHF 16.5 billion).»

UBS thus embodied two incompatible roles — the main beneficiary of the write-down and the inheritor of the very obligations Credit Suisse had toward its AT1 investors.

UBS could have stayed on the sidelines — allowing the legal dispute to play out primarily between bondholders and the regulator, especially in view of its inherited legal position vis-à-vis Finma. Instead, it chose to align itself fully with the regulator and actively defend the legality of the write-down.

The court explicitly noted UBS’s vigorous involvement: «Based on its conduct during the proceedings, it is evident that not only the complainants but also the respondent [UBS] attach considerable importance to the question of the legality of the challenged order.»

Whether this assertive legal strategy will stand the test of time remains to be seen.

5. The limits of emergency powers in bank rescues

One of the judgment’s central issues concerns the boundary between ordinary law and emergency powers.

The Federal Administrative Court concluded that the Federal Council and Finma exceeded the limits of the statutory framework during the March 2023 crisis.

The government’s emergency ordinance, adopted on 19 March 2023 to facilitate Credit Suisse’s rescue, added a new provision — Article 5a — allowing Finma to order a «complete or partial write-down of Additional Tier 1 capital.»

This was the legal hook used for the AT1 order later that evening.

However, the court found that this emergency law was unconstitutional because it intervened in an area already covered by existing legislation — namely, the Too Big To Fail framework, which prescribes how systemically important banks are to be stabilized or resolved.

Emergency powers under the Swiss Constitution, the judges noted, are reserved for unforeseen situations not addressed by existing law.

«Since 2008,» they wrote, «the legislator has anticipated the crisis scenarios of systemically important banks through the Too Big To Fail regulation. A bank run — a sudden and unpredictable loss of customer confidence — is not a new phenomenon but part of a bank’s inherent business risk.»

Accordingly, there was no basis for the Federal Council to act unilaterally through an emergency ordinance. «It is not at the Federal Council’s discretion to override a solution deliberately crafted by the democratic legislator for precisely such cases.»

If upheld by the Federal Supreme Court, this interpretation could sharply narrow the scope of governmental action in future banking crises.

6. Karin Keller-Sutter’s explosive statement

In the tense hours of 19 March 2023, Finance Minister Karin Keller-Sutter appeared before the press and declared: «This is not a bailout. This is a commercial solution.»

The court seized on that remark — because it directly contradicted the rationale Finma had used to justify the AT1 write-down.

The regulator had argued that the state’s liquidity support and loss guarantees amounted to «public support» within the meaning of the Capital Adequacy Ordinance.

The judges disagreed — and cited Keller-Sutter’s own words as evidence that the write-down lacked legal basis under emergency powers. «The merger in question,» they wrote, «is a legal transaction between two private-law entities.» And: «In essence, invoking emergency powers — despite existing statutory provisions — to protect the interests of one private party in the context of a ‹commercial solution› is not covered by Articles 184(3) or 185(3) of the Federal Constitution.»

If the rescue was indeed a «commercial solution,» then the legal foundation for the AT1 write-down collapses.

As finews has noted, the Federal Supreme Court — typically more deferential to state institutions — may yet find ways to soften or overturn the St. Gallen judges’ reasoning.

Even so, the Federal Administrative Court’s ruling has already achieved something lasting: it has opened an unprecedented window into the legal and institutional fault lines of the Credit Suisse rescue.