Credit Suisse staff face more deferred pay pain on Swiss ban

CREDIT Suisse Group’s bankers had deferred bonuses frozen by the Swiss government, adding pain to awards that were already decimated by the firm’s share plunge.

The Swiss government is “temporarily suspending” deferred remuneration granted in the years up to 2022, it said in a statement released on Tuesday (Mar 21). The bank can pay cash bonuses for last year as planned, after its executive board gave up such awards on Monday, the statement added.

Any shares earned in long-term awards are worth just a fraction of what current and former staff might have hoped for even a week ago. Credit Suisse stock will be converted into UBS shares at a ratio of 22.48 to one, once the deal has been finalised.

The share fall wiped out more than US$600 million from the value of deferred stock held by the company’s bankers, based on calculations by Bloomberg. Another 210 million Swiss francs (S$304.1 million) of special share awards that were handed out just last month were set to be paid out if the share price reached 3.82 Swiss francs on Dec 31, 2025. That is now impossible.

Credit Suisse staff are waiting to see how long the suspension lasts, as well as what the permanent status of the lender’s contingent capital awards will be. These awards were meant to mirror the risky bonds that were wiped out in the takeover, but they had yet to be written down to zero before the Swiss statement landed, a person familiar with the matter said on Tuesday.

The move by the Swiss government adds to uncertainty for bankers already contemplating whether they have a future as part of Credit Suisse’s biggest rival. At the investment bank, UBS wants to cherry-pick top Credit Suisse dealmakers instead of supporting Michael Klein’s plan to build a First Boston spinout, Bloomberg reported on Tuesday.

The contingent capital awards were worth about 360 million Swiss francs as at end-2022. One of the conditions of the awards is that the instruments have no value in the event of the bank’s collapse. 

But the nature of the rescue – couched as a private takeover – left some wondering if it was feasible the weekend’s events may not trigger this. 

Spokespeople for Credit Suisse and Finma, the Swiss market regulator, declined to comment.

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Credit Suisse staff face more deferred pay pain on Swiss ban

Contingent awards

Thousands of managing directors and director-level staff at Credit Suisse have received at least part of their bonuses in contingent capital units in recent years. These assets mimic many of the features of the bank’s 16 billion Swiss franc stack of Additional Tier 1 (AT1) securities, which were designed to give the bank more capital in times of crisis. 

On Sunday, Finma wrote off the AT1s to help cover the cost of the emergency tie-up with UBS.

In 2021, more than 5,000 Credit Suisse employees received contingent capital awards, of which 1,229 were classified as material risk-takers, performing jobs considered most vital to the bank’s health.

The lender stated in its annual report that the contingent capital awards carry “risks similar” to other contingent capital securities it issues. 

Credit Suisse granted the latest tranche of contingent awards to staff on Feb 11. This marks the last award of these instruments, which were already set to be discontinued.

Contingent awards generally vest over three years, though in some countries it is longer depending on local rules, and are denominated in either US dollars or Swiss francs. Holders are eligible to receive semi-annual interest payments, and upon maturity receive either cash or a contingent capital instrument.

The Swiss statement may snuff out already slim hopes that this slug of compensation might be unaffected, adding to a bleak outlook for the lender’s bankers already facing the threat of sweeping job cuts. BLOOMBERG