1. What are AT1 Bonds and What Happened to Credit Suisse At1 Bonds?

In general: AT1 Bonds, also known as Additional Tier 1 Bonds, serve as capital instruments that banks utilize to augment their core equity base in satisfying additional Tier 1 regulatory capital requirements imposed by Basel III. These capital cushion can support banks during market turmoil and had been created after the 2007-2008 global financial crisis to help undercapitalized banks and to reduce the potential for taxpayer-funded bailouts. Unlike conventional bonds, AT1 Bonds are perpetual and thus, the investors are not paid the principal amount. They are high-yield and high-risk products: Investors receive periodic, high fixed-interest payments during the life of the Bond; however, if the issuer’s (bank’s) capital drops under a specific level, the Bonds are either to be converted into common shares, or to be temporarily or permanently written down. The last possibility may occur under the specific terms and conditions of the Bonds issue, if the bank falls below its Basel Tier 1 capital requirements.

According to a statement of Swiss financial supervisory authority («FINMA»), the AT1 instruments issued by Credit Suisse contractually provide that they will be completely written down in a «Viability Event», in particular if extraordinary government support is granted. As Credit Suisse was granted extraordinary liquidity assistance loans secured by a federal default guarantee on 19 March 2023, these contractual conditions were met for the AT1 instruments issued by the bank. As a consequence, FINMA ordered Credit Suisse to write down CHF 16 billion (now about USD 20 billion) of the AT1 Bonds and the bondholders lost totally their investments, while UBS could take over Credit Suisse for CHF 3 billion.

2.  Two Class Actions Admitted in New York against UBS

According to a Reuters report a U.S. District Judge in Manhattan, Colleen McMahon, has admitted on July 7, 2025, two class actions of investors (one by Core Capital Partners and one by purchasers of Credit Suisse's American depositary shares and several other bonds) against UBS (and at least one against ex-Credit Suisse chairman Axel Lehmann, ex-CEO Ulrich Koerner, and ex-CFO Dixit Joshi) for claims related to the write down of Credit Suisse AT1 Bonds. The plaintiffs claim that the former Credit Suisse had defrauded them with false and misleading statements about its financial condition. The judge found it plausible that disclosures of the bank's alleged fraud caused the value of the AT1 Bonds to decline, «ultimately culminating in the eventual write down of all Credit Suisse AT1 Bonds to a value of zero.» McMahon, however, has refused to combine the two lawsuits. The next steps are discovery, motions if necessary, and later settlement or trial. The outcome has no immediate effect on the FINMA ruling but could trigger payments from UBS as legal successor of Credit Suisse. The chances of success for the plaintiffs with their lawsuits are open. 

3. Lawsuits against Switzerland

More than 500 investors from Singapore, Japan, and Hong Kong, who held Credit Suisse AT1 Bonds are in process of initiating arbitration proceedings against Switzerland. In February 2025, the Singapore law firm Drew & Napier has made public that the investors have submitted letters to the Federal Administration of Switzerland claiming around USD 250 million for a violation of the Swiss obligations under the investment protection agreements when the AT1 Bonds had been declared worthless by the Swiss authorities. These letters, under various bilateral investment treaties, triggered a six-month period for negotiations to resolve the dispute amicably. If no solution is found, the investors can initiate arbitration proceedings against Switzerland. Omni Bridgeway, a company offering financing and dispute resolution services, has entered into an agreement with the investors to cover the costs of this process, in exchange for a share of the damages recovered. Drew & Napier was strongly encouraging other affected investors in Singapore, Japan, Hong Kong, Thailand and Philippines to join the proceedings in early 2025 so that they could or still can also be included in the claim.

The British-based law firm Holman Fenwick Willan («HFW») wants to drag the Swiss government before the World Bank’s arbitration tribunal – Washington-based World Bank’s International Centre for Settlement of Investment Disputes («ICSID») – to seek compensation for investors from Singapore, China and the Middle East. The plaintiff represented by HFW is a group of former holders of Credit Suisse AT1 Bonds: Investors from Singapore had held USD 80 million (CHF 64 million) of these securities, while Chinese and Middle East-based creditors held another USD 300 million. Investor-state arbitration tribunals can award damages against the state (or dismiss claims). This would be the first such case to be heard by the ICSID. The subject of the dispute is that the declaring worthless of the Credit Suisse AT1 Bonds by FINMA was part of a deal orchestrated by the Swiss Federal Council – under international pressure – outside the existing legal system, on the basis of emergency law and using extensive state guarantees.

Eight former creditors are seeking approximately CHF 80 million in damages from Switzerland in proceedings before the U.S. District Court for the Southern District of New York. They argue that FINMA's decision to write down the Credit Suisse AT1 Bonds was unlawful and violated property rights. A first court date was set for February 2025, but continues to be delayed.

The U.S. asset manager AllianceBernstein and/or its clients, all represented by the law firm Quinn Emanuel Urquhart & Sullivan had filed a lawsuit in New York, Southern District, in January 2025, seeking damages of about USD 370 million from Switzerland. The ground for the action is unlawful encroachment on investors’ property rights; Switzerland argued that as a foreign state, it was entitled to sovereign immunity from the lawsuit and that the dispute should be adjudicated in a Swiss court. It is not yet decided whether the Court will accept the lawsuit.

4. Swiss Proceedings

360 appeals have been lodged with the Federal Administrative Court by around 3’000 AT1 investors against FINMA's decision to declare Credit Suisse's AT1 Bonds worthless. FINMA is accused of not having been permitted to write down the AT1 Bonds, as AT1 bondholders traditionally rank ahead of shareholders, but in this case lost everything while Credit Suisse shareholders received UBS shares. The proceedings are complex and have dragged on for two years without progress, causing frustration among the plaintiffs. A complaint was recently filed with the Federal Supreme Court to urge the Federal Administrative Court to speed up the process. If the lawsuits are successful, compensation would probably be paid, as reversing FINMA's decision would be too complex.

A landmark ruling by the Federal Administrative Court in May 2025 declared bonus cuts for former Credit Suisse managers to be unlawful; the Federal Department of Finance has appealed the ruling to the Federal Supreme Court. Although this decision does not directly affect AT1 Bonds, it shows that emergency measures are subject to judicial review – and are occasionally overturned.