Credit Sussie to change executives’ bonus system
Top managers of the Swiss second-largest bank will receive illiquid shares as part of their bonuses.ZURICH – Credit Suisse Group said Thursday it is changing its bonus system to transfer USD 5 billion (CHF 5.9 billion) in questionable assets to top managers.
Passing on the assets, which may turn out to be worth much less in current volatile markets, will help relieve Switzerland's second-largest bank of risky investments on its books, Credit Suisse said in an internal memo.
Managing directors, directors and members of senior management will receive cash for part of the bonuses in a payout in February, but they also will receive illiquid shares, the bank said in an internal memo to its employees.
The cash compensation will have to be paid back in rates if the employee quits, it said.
The memo did not contain any figures, but spokesman Marc Dosch said the shares had a book value of around USD 5 billion and that they would go to around 2,000 senior managers.
The shares "are linked to the performance of a pool of illiquid assets that were originated in the investment banking division," Credit Suisse said. The division was responsible for most of the bad subprime and other assets taken on by the bank in the leadup to the global financial crisis.
With these shares "a material block of legacy risk positions will be removed from Credit Suisse's risk weighted assets and this will also lead to a reduction in capital usage," the bank said.
It said earlier this month that it expects to reduce its exposure to risky investments by 12 percent in the fourth quarter to USD 170 billion.
The people receiving the bonuses may be able to sell the assets if the market values go up, but they also could go down, Credit Suisse said.
The bank declined to specify the total amount of bonuses, but said it would be lower than the previous year.
Credit Suisse earlier this month announced 5,300 job cuts - about 11 percent of its global work force - in a bid to reduce costs and take its business back into the black.
The bank has predicted another loss-making quarter, saying it was CHF 3 billion in the red by the end of November because of adverse market conditions and expenses associated with the job cuts.
Shares in Credit Suisse closed up 3.92 percent at CHF 30.2 Swiss.
[AP / Expatica]