Credit Suisse employee bonuses tied to AT1 bonds also wiped out

CREDIT Suisse Group informed employees that deferred awards meant to mirror bonds that were wiped out in the firm’s emergency sale to UBS Group will also be written to zero.

The move, described by people briefed on the decision, erases so-called contingent capital awards (CCAs) that had been worth 360 million Swiss francs (S$537.3 million) at the end of 2022. That adds to the pay pain for senior bankers that have seen share awards plummet in value and some bonuses cut or canceled by government decree.

The Swiss lender was forced to trigger a writedown of about US$17 billion of debt known as additional tier one capital (AT1) because the deal involved government support. While the contingent capital awards were designed to carry similar risks, the bank held discussions with regulator Finma about potentially excluding them from the writedown, said the people, asking to remain anonymous describing private talks.

A Credit Suisse spokesperson declined to comment, while a representative for Finma didn’t respond to a request for comment.

One of the conditions of the CCAs is that the instruments have no value in the event of a collapse of the bank. But the nature of the rescue – couched as a private takeover – left some employees wondering if it was feasible the deal may not trigger this.

Thousands of managing directors and director-level staff at Credit Suisse have received at least part of their bonus in contingent capital units in recent years. In 2021, just over 5,000 employees received them.

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Earlier this month, the Swiss government decided that Credit Suisse’s executive board and top managers one and two levels below would see outstanding bonuses cancelled or cut by up to half. That came on top of a loss in value of more than 2 billion Swiss francs to employee awards from the stock decline.

Credit Suisse shareholders voiced their discontent with the discrepancy between bonuses and profits at the firm’s final annual meeting this month. In the past dozen years, Credit Suisse put 35 billion francs into its annual bonus pools, according to Bloomberg calculations. The total profits it generated in that period: 35 million francs. BLOOMBERG