Credit Suisse Bonus Cuts Ruled Unlawful by Federal Court

In a stunning rebuke to the federal government, the Swiss Federal Administrative Court has declared the finance ministry's aggressive slash of Credit Suisse bonuses unlawful. This decisive ruling marks a significant victory for 12 former executives who refused to accept the state's punitive measures following the bank's 2023 collapse. The court's judgment is absolute: the government overstepped its authority.

The finance ministry had ordered drastic cuts to the compensation of the top three management levels after the emergency UBS takeover. However, the court has now dismantled this directive, asserting that the state cannot simply erase binding financial obligations to satisfy public outrage. This verdict sends a shockwave through Bern, proving that even in the aftermath of a national banking crisis, the rule of law remains rigid. The decision underscores a critical friction point between political action during financial emergencies and the ironclad protections of Swiss employment law.

The court's reasoning hinges on a fundamental pillar of Swiss law: the guarantee of ownership. The judges explicitly ruled that the bonuses in question were not discretionary gifts but bindingly guaranteed claims arising from employment contracts. As such, these claims are constitutionally protected property. The court stated unequivocally that the legal basis required for such a "serious encroachment" on these rights is simply lacking.

While the public may clamor for accountability, the judiciary has prioritized constitutional integrity. The Banking Act, which the government relied upon to justify the cuts, does not contain the necessary legal firepower to override these property rights. This ruling highlights a massive legislative gap. The court found that while the state can impose measures, it cannot violate the sanctity of a contract without explicit statutory authority—authority that the current Banking Act fails to provide. This creates a fortress around executive compensation that even the federal government cannot breach without new legislation.

The timeline of events exposes a critical overreach by the finance ministry. The court emphasized that the law only permits intervention measures for the duration of state aid. Crucially, all state support for the beleaguered bank had ceased by August 11, 2023. Yet, the ministry attempted to enforce definitive, permanent reductions that extended well beyond this deadline.

This attempt to extend state power beyond the crisis window was firmly rejected. The government tried to turn a temporary emergency measure into a permanent penalty, a move the court has now deemed illegal. By ordering the bonuses to be reduced definitively—beyond the lifespan of the state aid—the ministry acted without a valid legal mandate. This distinction is vital: emergency powers have an expiration date. The ruling serves as a stark warning to federal authorities that crisis management does not grant them indefinite control over private sector contracts once the immediate financial danger has passed.

This judgment sets a formidable precedent for the future of Swiss banking regulation. It clarifies the limits of state intervention in the financial sector, establishing that property rights and contract law stand firm even against the backdrop of a bank's collapse. For the 12 executives involved, this is a total vindication of their legal rights, ensuring their compensation remains untouched despite the reputational ruin of their former employer.

However, for the Swiss public and policymakers, the ruling is a bitter pill. It exposes the fragility of the current legal framework in holding top management financially accountable during a bailout. If the government wishes to have the power to slash bonuses in future crises, the Banking Act will require a comprehensive overhaul. Until then, the constitution remains a shield that protects contractual earnings, regardless of corporate performance or public sentiment. The message is clear: without a change in the law, the golden parachutes of top executives remain legally bulletproof.