Swiss court registers 150 lawsuits against FINMA over Credit Suisse AT1 wipe-out

The Swiss regulator FINMA has been hit by 150 lawsuits over its decision to wipe out $17bn of Credit Suisse additional tier one (AT1) bonds in March as part of the takeover deal of the bank by rival UBS. 

A spokesperson for the Swiss Federal Administrative Court told Investment Week it had registered around 150 appeals, which represent between 2000 and 2500 individual appellants as of yesterday evening (4 May). They declined to make any further comment. 

The AT1 bonds were issued by Credit Suisse as part of its capital structure to meet regulatory capital requirements. FINMA's decision on 19 March angered bondholders, given unsecured bondholders traditionally rank above equity holders in the capital structure.

Credit Suisse AT1 bond investors sue Swiss regulator

Investors have criticised FINMA's decision to pass through last-minute legislation to write down the bonds, which they say upended the established insolvency hierarchy when shareholders who should have ranked below bondholders received $3.25bn in compensation. However, this risk was included in the bonds' brochure.

The law firms representing the wiped out bondholders are contesting the legitimacy of FINMA's decision leading to the wipeout. These include Quinn Emanuel Urquhart & Sullivan, Pallas Partners, Chabrier Avocats, Jacquemoud Stanislas and Drew & Napier.

Quinn Emanuel Urquhart & Sullivan filed an appeal against the order issued by the regulator to write down these instruments on 18 April on behalf of investors that held around $6bn in the bonds, arguing FINMA had acted unconstitutionally by failing to behave "proportionately" and "in good faith". 

Holders of $1.7bn Credit Suisse AT1 bonds sue Swiss regulator

Pallas Partners also lodged its appeal last month on behalf of institutional investors and asset managers with $1.35bn invested in the bonds, as well as retail and family office clients accounting for $300m.

The firm said the Swiss regulator had no right to order the write-off and is seeking compensation for its clients over what it described as an "abuse of process".