In a landmark decision, Switzerland’s Federal Administrative Court has ruled that the Swiss government’s move to slash or cancel bonuses for former Credit Suisse executives following the bank’s 2023 collapse was unlawful. The court determined that these bonuses were contractually guaranteed and thus protected as property, making UBS, which acquired Credit Suisse, liable for restitution.
Background of the Ruling
The Swiss government’s decision to cut bonuses came in the wake of Credit Suisse’s failure and subsequent acquisition by UBS in a government-brokered deal. Approximately 1,000 former Credit Suisse employees were affected by the bonus cuts, which the court has now deemed illegal. The ruling emphasizes the sanctity of contractual agreements, even in the face of financial institution failures.
Implications for UBS and the Banking Sector
UBS now faces the financial burden of compensating former Credit Suisse executives, adding complexity to its integration of the failed bank. This decision may also set a precedent for how executive compensation is handled in future banking crises, potentially limiting governments’ ability to retroactively alter contractual agreements.
Potential Appeals and Future Considerations
The Swiss finance ministry is currently reviewing the court’s decision and may consider an appeal to the Federal Supreme Court. The outcome of any such appeal could further define the boundaries of government intervention in private contractual matters within the financial sector.
The court’s ruling reinforces the legal protections surrounding contractual compensation agreements, even amid financial turmoil. As UBS navigates the repercussions, the decision serves as a critical reference point for the balance between governmental authority and contractual obligations in the banking industry.
