24-5-2023 (ZURICH) Senior managers at Credit Suisse will see their outstanding bonus payments for 2022 either cancelled or reduced, as mandated by an order issued on Tuesday (May 23) by the Swiss Finance Ministry. This decision comes in the wake of the Swiss government’s multi-billion franc rescue of the country’s second-largest bank.
While it is uncommon for governments to completely halt bonus payouts, public sentiment in Switzerland has been critical of such payments, particularly at Credit Suisse. The bank’s rescue earlier this year received approximately 260 billion Swiss francs of state funding and guarantees.
The ruling will impact approximately 1,000 employees, who will be deprived of variable remuneration amounting to around 50 million Swiss francs (US$56.25 million) to 60 million Swiss francs (US$67.50 million) that had been accrued until the end of 2022.
The executive board will have their outstanding bonus payments up until the end of 2022 cancelled, while managers one level below will face a 50 percent reduction in their payments. Managers two levels below will experience a 25 percent decrease in their outstanding variable payments, according to the ministry.
“The decision takes into account the varying degrees of responsibility held by the most senior managers for the situation at Credit Suisse,” stated the ministry in a press release. Furthermore, it added that “variable remuneration for these management levels due in 2023 will be cancelled or reduced on a pro-rata basis until the takeover is completed.”
The ministry also instructed Credit Suisse to examine the possibility of recovering remuneration that had already been paid out to members of the group’s management since 2019.
This order follows temporary measures implemented by the Swiss government in March, which suspended variable payments shortly after the emergency takeover by UBS was agreed upon.
As part of a comprehensive package orchestrated by Swiss authorities, UBS will acquire Credit Suisse for 3 billion Swiss francs and bear up to 5 billion francs in losses. In return, the Swiss government has agreed to cover potential losses of up to 9 billion francs from the deal and provide liquidity assistance of up to 100 billion francs.
Additionally, on Tuesday, the Finance Ministry directed UBS to design a compensation scheme that incentivizes staff responsible for selling off Credit Suisse assets to minimize losses in the sales process.
“The aim is to create an incentive for achieving the lowest possible losses in order to avoid, whenever possible, the utilization of the federal guarantee,” explained the ministry.
