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The Swiss government’s decision to strip former Credit Suisse bankers of their bonuses following the lender’s rescue by UBS was unlawful, a court has ruled.
The Swiss Federal Administrative Court sided with 12 former Credit Suisse managers in a “pilot judgment” published late on Tuesday, ruling that there was no legal basis for the Federal Department of Finance (FDF) to permanently reduce the payouts after the bank received state aid.
After years of scandals and financial losses, Credit Suisse was rescued by UBS in a government-engineered takeover in March 2023.
The Swiss government cut bonuses for about 1,000 senior bankers at Credit Suisse, with the executive team losing their outstanding variable pay entirely. Bonuses for managers one level below the executive board were slashed by 50 per cent, while employees two levels below had their bonuses cut by 25 per cent.
“All state aid to Credit Suisse had ceased by 11 August 2023 at the latest. However, the FDF ordered that the remuneration of the affected employees be definitively — ie beyond the end of the duration of the state aid — reduced or cancelled. This order is considerably more onerous than a temporary payment ban and is not foreseen in the law,” the court said.
The court emphasised that the bonuses were legally binding employment entitlements protected under the Swiss Constitution’s guarantee of ownership. Any permanent interference with such rights requires clear legal authority, which the court found absent in this case.
“Neither the [finance department], nor UBS, could demonstrate that even a single one of the 12 managers concerned had caused excessive risks and jeopardised the financial situation of Credit Suisse through their wrongful actions or omissions,” it added.
The court said that none of the 12 former Credit Suisse employees who brought the case had been top managers at the bank. The court’s ruling may be challenged at the country’s Federal Supreme Court.
The ruling is likely to spark controversy as it comes amid public anger over the mismanagement that led to Credit Suisse’s downfall. Many view the bank’s top leadership as responsible for years of risky decisions and scandals that ultimately triggered its collapse and forced a government-backed rescue.
UBS said: “We take note of the decision.”
Remuneration in the financial services sector has been politically sensitive in Switzerland following Credit Suisse’s demise. UBS chief executive Sergio Ermotti is Europe’s best-paid bank chief executive, taking home SFr14.9mn ($17.8mn) last year.
UBS is braced for the government to unveil draft legislation on reforms to bank capital rules next month, which the lender has warned could increase its capital requirements by up to $25bn.
The regulatory uncertainty has weighed on the Swiss bank’s share price, with the lender being deposed as continental Europe’s most valuable lender by Santander last month.
