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Credit Suisse hikes cash bonuses as talent war rages

01/28/2022 | 10:29am EDT
FILE PHOTO: The logo of Swiss bank Credit Suisse is seen in Zurich

ZURICH (Reuters) -Credit Suisse is boosting cash payouts for senior bankers, it told employees on Friday, as it tries to retain top performers after a year of scandals saw its shares lose more than a quarter of their value.

The bank, which has been hit by a string of scandals and losses, is increasing the cash portion of short term bonuses senior staff receive and reducing the amount they get in shares that vest after one year, according to a memo seen by Reuters.

Across the financial industry, banker pay jumped in 2021 due to a bumper year for trading and dealmaking and firms are finding it harder to find and keep top performers. On Thursday, Deutsche Bank said compensation at its investment bank rose 30% in the fourth quarter of last year.

Switzerland's second-biggest bank, meanwhile, faced an exodus of dealmakers and other senior bankers in 2021 after heavy losses prompted sackings, bonus cuts and an overhaul of its strategy and top management.

Now, in an unusual move, Credit Suisse is upping top earners' immediate cash payment, although they can only keep it if they stay with the firm for three years.

"For Managing Directors and Directors, this change is intended to rebalance the amount of immediate cash that is paid compared to prior years," executive managers told employees in the internal memo confirmed by the company.

Those receiving upfront cash would have to repay part of it if they left the bank within three years.

While clawback provisions - which often cover portions of bonuses composed of shares yet to vest - are typical in bankers' variable compensation and mean bonuses can be recouped if bankers are found to have violated certain rules, the move to recoup cash bonuses for leavers is unusual.

The new plan will not alter the proportion of bonuses covered by deferred compensation, which in the European Union and Britain must cover at least 40-60% of variable compensation, because longer term bonuses, which are paid in shares and vest after three years, will remain the same portion of the overall payout.

The changes apply to staff who earn more than $250,000.

Credit Suisse racked up a multibillion-dollar loss in 2021 on the default of a single investment banking client, while its asset management was hit by the collapse of $10 billion in funds linked to insolvent supply chain finance firm Greensill.

It has been trying to turn the page on a slew of negative headlines and reform its risk management culture, an effort set back by the abrupt departure this month of the chairman brought in just nine months earlier to lead that transformation.

On Tuesday, it warned it would report a fourth-quarter loss based on fresh legal costs and a slowdown in its trading and wealth management divisions.

With its new incentives scheme, Credit Suisse told employees it aimed to reinforce a culture "based on personal accountability and responsibility" that would better align compensation with "positive behaviors".

"With regards to executive compensation, Credit Suisse aims to strike an appropriate balance with the interests of shareholders and wider stakeholders," the bank said in a statement. "We have also said that we will further align remuneration with our new strategic objectives, including our renewed focus on risk management."

It introduced a one-time share plan for senior managers, which will vest in three years' time, but "only if certain metrics tied to our strategic objectives are reached."

(Reporting by Brenna Hughes Neghaiwi, Oliver Hirt and John RevillAdditional reporting by Huw JonesEditing by Tomasz Janowski and Mark Potter)

By Brenna Hughes Neghaiwi and Oliver Hirt

© Reuters 2022
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