The recent ruling by the Swiss Federal Administrative Court regarding the bonuses of former Credit Suisse bankers has stirred controversy in the financial sector. The court deemed the Swiss government’s decision to strip the bonuses of the bankers following Credit Suisse’s rescue by UBS as unlawful. The court sided with 12 former Credit Suisse managers, stating that there was no legal basis for the Federal Department of Finance to permanently reduce the bonuses after the bank received state aid.
Credit Suisse, after years of scandals and financial losses, was rescued by UBS in a government-engineered takeover in March 2023. The Swiss government then cut bonuses for approximately 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%, while employees two levels below had their bonuses cut by 25%.
The court emphasized 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. The court also highlighted that none of the 12 former Credit Suisse employees who brought the case had been top managers at the bank.
The ruling has raised concerns and public anger over the mismanagement that led to Credit Suisse’s downfall. Many believe that the bank’s top leadership is responsible for years of risky decisions and scandals that ultimately led to its collapse and the need for a government-backed rescue. UBS, the rescuing bank, stated that they take note of the court’s decision.
Remuneration in the financial services sector in Switzerland has been a politically sensitive issue, especially after Credit Suisse’s demise. UBS chief executive, Sergio Ermotti, is Europe’s best-paid bank chief executive, earning SFr14.9mn ($17.8mn) last year. The uncertainty surrounding regulatory reforms and potential increases in capital requirements have weighed on UBS’s share price, leading to the lender being surpassed by Santander as continental Europe’s most valuable lender.
The court’s ruling may be challenged at the Federal Supreme Court, further prolonging the debate and controversy surrounding the bonuses of former Credit Suisse bankers. The financial sector in Switzerland remains on edge as it navigates through these challenging times.
