CREDIT SUISSE GROUP AG Basel III
Pillar 3 - UK Remuneration Disclosures 2021
1. Overview
These disclosures are made in accordance with Article 450 of the Capital Requirements Regulation, the Basel Committee on Banking Supervision (BCBS) Pillar 3 disclosure requirements standards and the EBA's Guidelines on sound remuneration policies and its Final draft ITS on public disclosures by institutions under Part Eight of Regulation (EU) No 5752013.
They are made in respect of the remuneration period ending 31 December 2021 with respect to the following Credit Suisse Group AG ('the Group') UK subsidiaries:
Credit Suisse International ("CSi")
Credit Suisse Securities (Europe) Limited 1 ("CSSEL")
Credit Suisse (UK) Limited ("CSUKL")
Credit Suisse Asset Management Limited 2 ("CSAML")
This document sets out remuneration practices in relation to all the firms listed above. Where a response differs for a firm, it is specified accordingly. For MRTs, references may be made to reflect requirements under the respective PRA and FCA remuneration rules under Capital Requirements Directive (CRD) V, the PRA Rulebook (the "Rulebook") and the FCA Handbook (the "Handbook"). Some references may also be made in relation to CSAML that is solely regulated by the Financial Conduct Authority (FCA) and that in 2021 remained subject to CRD IV, before its transition to the IFPR regime from 1 January 2022. This entity is therefore subject to the equivalent Remuneration Part of the FCA Handbook. Additionally, for 2021 CSAML has been treated as a Level 3 firm based on the individual guidance that it has received in the past years.
2. Group Compensation Policy
The employees of the UK legal entities are, in the first instance, governed by the Group-wide Compensation Policy and Implementation Standards of Credit Suisse.
The Group is committed to responsible compensation practices. The need to reward the Group's employees fairly and competitively based on performance is balanced with the requirement to do so within the context of principled behavior and actions, particularly in the areas of risk, compliance, control, conduct and ethics. Compensation contributes to the achievement of the Group's objectives in a way that does not encourage excessive risk-taking or the violation of applicable laws, guidelines, and regulations, taking into account the capital position and economic performance of the Group over the long term.
The Group Compensation Policy applies to all employees and compensation plans of the Group. The institution's remuneration policy is consistent with the objectives of Credit Suisse Group's business and risk strategy, cultural values, including with regard to environmental, social and governance (ESG) risk factors, long‐term interests of the institution, and the measures used to avoid conflicts of interest, and should not encourage excessive risk taking. The key objectives of the Group Compensation Policy as set out in the chart below:
2
1. Part of the consolidated group headed by Credit Suisse Investments (UK)
2. Part of the consolidated group headed by Credit Suisse Asset Management (UK) Holding Limited
The Compensation Policy adheres to the compensation principles set out by the Swiss Financial Market Supervisory Authority (FINMA) and similar guidelines adopted by other regulators in locations where the Group has operations. Furthermore, the Compensation Policy is in compliance with the Swiss Ordinance against Excessive Compensation with respect to Listed Stock Companies (VegüV) as well as other applicable legislation and regulations.
3. Compensation Governance
Credit Suisse Group has a policy of a clear separation of responsibilities between the recommendation, review and approval of compensation plans.
Group Governance Body | Responsibilities in relation to Group Compensation Policy |
Board of Directors |
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Compensation Committee |
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Executive Board and other senior management |
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As set out in the chart above, the Group Board of Directors is responsible for the implementation of the Compensation Policy as well as related rules and regulations, including overall responsibility for the approval of compensation plans and expenses. The Compensation Committee (CC) consists of independent directors, and does not include either the BoD Chair or the Chief Executive Officer (CEO). The CC reviews proposals regarding compensation of the Group, compensation payable to members of Board and Executive Board, the head of Internal Audit and certain other members of senior management, and makes recommendations to the Board for approval, assisted by an independent external consultancy. Deloitte LLC (Deloitte) has appointed a senior consultant to advise the Compensation Committee in 2021. The Compensation Committee's Charter is availablehere.
Credit Suisse Group additionally has UK-specific Advisory Remuneration Committees, ("RemCos") for Credit Suisse International and Credit Suisse Securities (Europe) Limited, as well as for Credit Suisse (UK) Limited. The Advisory RemCos have a specific duty to advise and make recommendations to the Group Compensation Committee on matters for which the Compensation Committee is responsible under the Rulebook and the Handbook, specifically on compliance of the Group Compensation Policy with all relevant UK compensation regulations.
Group Internal Audit, as part of standard procedures, conducts regular reviews of compensation practices to ensure that Group Compensation Policy and Implementation Standards, external regulations and guidelines are adhered to, and that processes for achieving and maintaining balanced incentive compensation arrangements are consistently followed.
4. Compensation Structure and Instruments
The Group takes a Total Compensation approach, based on two principle components: fixed compensation and variable compensation.
The mix of fixed and variable compensation is designed to ensure adequate consideration of risk and conduct in compensation decisions, and varies according to the employee's position and role within the Group. For example, the targeted compensation mix of individuals working in control functions is designed to have a higher proportion in fixed compensation, and a smaller proportion in variable compensation. While those on the revenue-generating side will typically have a higher proportion in variable compensation.
Additionally, in accordance with the CRD remuneration rules, the variable component for Material Risk Takers (MRTs) of our Level 1 UK legal entities is capped at 200% of the fixed component, as approved by the shareholders of these legal entities on 8 May 2014, subject to periodic review and confirmation by the Group Compensation Committee and the UK Advisory RemCos.
4.1. Fixed Compensation
Fixed compensation, which is most commonly paid in the form of base salary, is based on the skills, qualifications and relevant experience of the individual, as well as the responsibilities required by the role and external market factors. Fixed compensation may include non-discretionary allowances as well as, for certain MRTs, role-based allowances granted in relation with MRT's place of work, role and organisational responsibilities. Pension and other benefits are non-discretionary and are categorised as fixed compensation.
4.2. Variable Compensation
The level of variable compensation granted is entirely at the discretion of the Group, and may be zero in cases of substandard performance or other reasons. Variable compensation, which includes non-deferred and deferred portions, may be impacted by various factors, including absolute and relative performance of the Group and its divisions, performance ratings and achievement of pre-agreed individual performance objectives of employees, non-financial performance indicators, market positioning, and a variety of other factors.
Above a certain threshold, a portion of variable compensation is subject to mandatory deferral to reflect the nature of the Group's business, its risk profile, and the desire to have compensation plans that are based on sustainable performance criteria. Generally, the higher an individual's total compensation, the higher the percentage that is deferred. Deferral percentages are regularly reviewed by the CC, and are internally communicated. Deferral percentages also take into consideration market practice and applicable regulations, and may differ in certain markets. For 2021, the maximum deferral rate was set at 50%. Deferred compensation elements are typically subject to a vesting period of three years (ratably) for non-MRTs and a minimum four to seven years for our UK MRTs. Other deferral periods may be decided upon by the CC based on a number of factors, including further regulatory requirements.
The Group's primary long-term incentive compensation plan is the Credit Suisse Group AG Master Share Plan (the "Plan"). Deferred compensation instruments are designed to align the interests of employees with the interests of shareholders. The Group seeks to achieve this by providing deferred instruments, the value of which are either tied to the share price performance of the Group, the pre-tax profit of the Divisions, or the Return on Equity (ROE) of the Group.
In exceptional and justified circumstances, the Group may award guaranteed variable compensation, granted as part of a contractual obligation. Guarantees, that are subject to appropriate level of approvals, are limited for the first year of employment only and are awarded to attract new employees into the firm where they have no established performance or reputation. Additionally, the pay out of the guaranteed variable remuneration is also subject to individual's adherence to firm's policies and procedures and is subject to minimum conditions, such as that the employment is not terminated or notice is given and employee is not subject to a disciplinary sanction. It is the Group's policy to not award multi-year guarantees to any employees. Guaranteed compensation arrangements to existing employees are strictly prohibited.
4.3. MRTs
The 2021 MRTs of the UK entities consist of senior individuals identified in accordance with the PRA Rule 3.1(1) of the PRA Rulebook, the PRA MRT Regulation (MRTR) as well as the Regulatory Technical Standards 604/2014 (2014 RTS) criteria, in the context of the rules under Senior Manager and Certification Regime as well as the Credit Suisse organizational structure. The population includes individuals holding a PRA/FCA Senior Management Function, the non-executive and executive members of Boards of relevant UK entities, heads of material business units within our UK legal entities, control and corporate functions, as well as other individuals who meet the MRT criteria. The population may also include other categories of staff identified based on regulatory feedback and/or internal assessments of those taking material risk. Finally, MRTs are identified under the quantitative criteria on the basis of their total compensation awarded for the prior year and where the firm has determined that individual's professional activities are considered to have a material impact on the firm's risk profile. Certain exclusions may apply, and are subject to final ratification of the relevant UK Remuneration Committee and the UK regulators.
The MRT population is subject to scrutinised compensation structuring rules. In a way of example, where required by the PRA Rulebook or FCA Handbook, variable compensation awarded to MRTs is subject to at least 40% or 60% deferral. Generally, MRTs' variable compensation is subject to a deferral period of four years, which can be increased typically to five years for senior individuals holding senior positions within our material business units, our corporate or control functions and seven years for our UK Senior Managers. Additionally, at least 50% of both, deferred and non-deferred variable compensation awarded to MRTs, is awarded in shares or share-linked instruments under the Plan that are subject to a retention period of twelve months following vesting during which they cannot be sold or transferred. Deferred instruments granted to MRTs are not entitled to dividend or interest payments.
In certain circumstances, severance payments and certain other compensation elements made to MRTs of UK's Level 1 firms are also treated as variable compensation, and follow similar structuring rules as described above.
5. Determination of Variable Compensation Pools
In determining the global variable compensation pools, the Compensation Committee aims to balance the distribution of the Group's profits between shareholders and employees. The starting point of the bonus pool development is the Group's financial performance in terms of economic contribution, measured as adjusted income before taxes excluding variable incentive compensation expenses, after deducting a capital usage charge. The methodology to determine the Group and divisional pools also takes into account key performance metrics and certain non-financial criteria, including risk and control, compliance and ethical considerations and relative performance compared with peers, as well as the market and regulatory environment and any extraordinary events, such as, but not limited to, company reorganizations, major legacy settlements or any other exceptional circumstances.
The allocation of variable compensation varies by division and the risk-adjusted performance of each division is factored into an appropriate extent. Adjustments of divisional allocations are at the discretion of the BoD based on recommendations by the CC and are influenced by the long-term strategic direction and objectives of the divisions. The Group Compensation Committee can apply discretion to make adjustments (including negative adjustments) to the variable compensation pools.
The total amount of the pool for the corporate functions is not linked to the performance of the particular divisions that employees of the corporate functions support, but takes into account the Group-wide financial performance, measured in the form of Group economic contribution and qualitative measures. Therefore, employees working in the corporate functions, including those performing control functions, are remunerated independently from the performance of the businesses they oversee and support. As with the business divisions, risk, control, compliance and ethical considerations and relative performance compared to peers, as well as the market and regulatory environment, are taken into account.
Once the pools have been set at the Group and divisional levels, each business division allocates its pool to its business areas, based on the same or similar factors as used to determine the divisional pool. Capital usage and risk are factored into the pools as they are allocated within business areas. The corporate functions pool is allocated to the various functions within the corporate functions based on factors such as the achievement of performance objectives, compliance with policies and regulations, and market conditions.
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Credit Suisse Group AG published this content on 21 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 April 2022 16:34:07 UTC.
