Credit Suisse restricts pay as restraint calls grow
Credit Suisse is to subject more of its bankers to deferred compensation programmes and cut cash payouts, as calls for banks to show pay restraint grew among politicians.
January 10, 2011 / 21:19 IST
Credit Suisse is to subject more of its bankers to deferred compensation programmes and cut cash payouts, as calls for banks to show pay restraint grew among politicians.
Switzerland's second-largest bank said on Monday it will apply the changes to its 2010 pay round, in a move that follows stricter bonuses rules imposed across the rest of Europe.Toughened pay regulation has yet to quash intense public scrutiny over year-end payouts, however, and governments are struggling to ward off a backlash against excessive rewards as details of top bankers' pay packages begin to emerge.In Britain, where bankers' bonuses are still an explosive political topic two years since the height of the financial crisis, Deputy Prime Minister Nick Clegg urged state-backed banks to show extra sensitivity and transparency.Clegg's remarks were directed at bosses, after the Sunday Telegraph newspaper said Stephen Hester, chief executive of majority taxpayer-owned Royal Bank of Scotland, was in line for a 2.5 mn pound (USD 3.9 mn) bonus."The directors of these banks have been asked to do a job, to fix those banks and make them healthy again. That job isn't complete yet, and until it is, I think that should be reflected in the remuneration," Clegg told BBC radio.UK industry sources have said banks could make a commitment to small business lending as part of the talks over pay.Switzerland's top bankers have also come under fire at home, after Credit Suisse last year awarded CEO Brady Dougan shares worth around 71 mn Swiss francs (USD 66.6 mn) under a five-year bonus plan. The Swiss government has kicked off a legal process to tighten regulation of its top banks, including the right to force banks that are bailed out by the state to make changes to bonuses and even canceling payouts. After bringing in a new pay structure last year, Credit Suisse's revamped rules will see it lower the threshold for deferred bonus restrictions to 50,000 Swiss francs from 125,000 francs, leaving more employees subject to the measures.Averting another backlash?Credit Suisse said the changes were made against a backdrop of emerging regulation and market practices and in dialogue with regulators and shareholders. It will see a lower portion of bonuses paid in cash, and shares granted under the 2010 bonus scheme delivered annually between 2012 and 2015.The upside and downside potential of the awards would be based on the share price performance and there would no longer be "leverage features" that could potentially boost the number of shares awarded based on future performance, the bank said.The measures also include bonus clawback clauses similar to the ones drawn up in guidelines for European Union members at the end of December, with Credit Suisse able to cancel deferred bonuses if bankers engaged in activities that caused material financial or reputational harm to the bank.Although exempt from the EU bonus rules at home, Credit Suisse and bigger rival UBS, both of which have big international investment banking divisions, have made moves to bring in restrictions on pay after 2008's banking crisis.UBS brought in a scheme that withholds a portion of bonuses and only pays them out if the bank's results warrant it.Credit Suisse increased bonus share components for senior bankers in 2009 and slashed its pay pool, but it then paid out mid-year rewards in August in a bid to retain staff, sparking another backlash. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
