Bonus payments for Credit Suisse employees have been restricted by Swiss authorities, a move that will punish bankers following a multi-billion franc state rescue of the bank.
Credit Suisse was told to “temporarily” suspend “already granted but deferred variable remuneration,” such as shares, awarded in the years up to 2022, according to a statement from the Swiss government on Tuesday.
For the year 2022, the government stated that it would not retroactively forbid already-paid or immediately payable bonuses.
“The aim of this is also to avoid impacting employees who did not themselves cause the crisis,” it said.
There has been public opposition to bonus payments at the bank, whose rescue was supported by approximately 260 billion Swiss francs ($280 billion) in state funding and guarantees. It is extremely uncommon for a government to impose a stop to bonus payouts.
Swiss unions had earlier demanded that management bonuses be stopped on Tuesday. Bank employee groups have also expressed outrage over possible job losses and asked for extra protections.
“It has to be read as recognition that major mistakes have been made at Credit Suisse and it would be so inappropriate if the board received any variable compensation at this time,” said Clive Howard, employment law partner at Keystone Law.
Staff members had been upset about their bonuses since the takeover. It was unclear how many of the 50,480 employees of Credit Suisse would be impacted. Credit Suisse chose not to respond.
Credit Suisse had been battling a crisis of confidence for months, battered by years of scandals and losses. Last week, it was quickly put out of business, and over the weekend, Swiss authorities arranged for the bank to be acquired by its larger rival UBS.
After the global financial crisis more than ten years ago, authorities introduced regulations to limit risk-taking and permit senior employees to receive clawbacks on compensation.
The executive board of Credit Suisse received fixed compensation of 32.2 million Swiss francs for 2022 but did not receive a bonus as a group for the first time in more than 15 years.
According to the bank’s annual report, the bonus pool decreased by 50% in 2022 to 1 billion Swiss francs.
The Swiss government also gave its finance ministry instructions to suggest additional measures regarding Credit Suisse’s variable compensation.
As a matter of “decency,” according to Pierre-Yves Maillard, president of the Swiss trades union federation, managers shouldn’t receive bonuses.
“We should even ask for them to pay back what they gain those past two years,” he said before the government’s announcement.
(Adapted from TheEconomicTimes.com)