The court ruled that the Swiss government decided to deprive Swiss bankers of their bonuses after the lender's rescue.
The Swiss Federal Administrative Court stood aside with 12 former credit managers in a "pilot judgment" issued late Tuesday, ruling that the Federal Ministry of Finance (FDF) has no legal basis for permanently reducing spending after banks receive state aid.
After years of scandal and financial losses, Credit Suisse was rescued by UBS in a government engineering acquisition in March 2023.
The Swiss government ruled a bonus of about 1,000 senior bankers in Credit Suisse, and the executive team completely lost the outstanding variable salary. Bonus for managers above the executive committee were cut by 50%, while employees below reduced their bonuses by 25%.
“All state aid to Switzerland will be stopped by August 11, 2023 at the latest. However, the FDF ordered that the compensation of affected employees must be reduced or cancelled for the duration of state aid.
The court stressed that these bonuses have legally binding employment rights and are protected by the guarantee of ownership of the Swiss constitution. Any permanent intervention in such rights requires clear legal authority, in which case the court considers this to be none.
It added: “Neither (the Department of Finance) nor UBS could prove that even one of the 12 managers involved poses excessive risks and jeopardizes Credit Suisse’s financial position through their wrongful actions or omissions.”
The court said none of the 12 former credit employees who filed the case were senior executives at the bank. The court's ruling could be challenged in the country's federal Supreme Court.
The ruling could be controversial because it has sparked public outrage over the mismanagement that led to the downfall of Credit Suisse. Many believe that the bank’s top leadership is years of risk decisions and scandals that ultimately triggered its collapse and forced a government-backed rescue.
"We noticed this decision," UBS said.
After Credit Suisse's death, the financial services sector's compensation was politically sensitive in Switzerland. UBS CEO Sergio Ermotti is the CEO of Europe’s best bank, accounting for $14.9 million ($178 million) last year.
UBS helps the government unveil draft legislation on reform of bank capital rules next month, with lenders warning that the regulation could raise its capital requirements to $2.5 billion.
Regulatory uncertainty has had some impact on Swiss bank's share price, which was revoked by Santander as the most valuable lender in the continent last month.