Financial News

  • 18 February 2014, 11:01

Credit Suisse Bankers Face Delay To Bonuses

Hundreds of London-based bankers face having to wait until 2021 before they can cash in on bonuses awarded two years ago following an intervention by regulators.

Sky News has learnt that senior staff at Credit Suisse were told last week that they may not be able to receive millions of pounds-worth of deferred payouts which were due to mature in 2016 for a further five years under a revised scheme.

Credit Suisse, which employs thousands of people at its UK base at Canary Wharf in London, is overhauling its Partner Asset Facility (PAF) 2012 programme in the wake of rule changes introduced by international banking supervisors.

According to a memo sent last week to eligible staff, a copy of which has been seen by Sky News, the award "was linked to a portfolio of the bank's credit exposures, and provided risk offset and capital relief to the bank.

"Due to regulatory changes, this capital relief is no longer available and accordingly, your PAF2 award will be amended in accordance with its terms."

Under the plans, employees can elect to receive so-called Contingent Capital Awards (CCAs) similar to those awarded last month as part of their deferred pay for 2013.

These instruments are bonds which would effectively be wiped out if Credit Suisse's buffer of top-tier capital falls below a specific threshold.

"If you choose the CCA option, the bank will waive its right to extend the PAF 2 maturity, so settlement would be expected to occur in early 2016, subject to regulatory approvals," the memo said.

"Settlement would occur either by a cash payment of the fair value of CCAs at that time or physical delivery of an actual contingent capital security able to be held thereafter or sold in the market. Prior to settlement, the CCAs will pay contingent coupon amounts."

Staff can alternatively choose to have their bonuses linked to a new vehicle called a Capital Opportunity Facility.

According to the note to staff, this would be a "seven-year facility that is linked to the performance of a portfolio of risk transfer and capital mitigation transactions chosen by the PAF Management Team".

Under this arrangement, the bonuses would not be paid out until 2021 although bankers would receive annual payments of 6.5% of the deferred sum as a coupon.

The new bonus deferrals apply to several thousand directors and managing directors at Credit Suisse's investment bank, hundreds of whom work in London.

The Zurich-based group has been a pioneer of unusual pay arrangements for its investment bankers, devising a scheme in 2008 which linked staff remuneration to the value of a pool of illiquid assets held on its balance sheet.

The principle of deferred pay has become firmly established in the City and on Wall Street since the banking crisis, although an effective nine-year delay from the point at which bonuses were awarded is unusually lengthy by industry standards.

A Credit Suisse spokesman confirmed the content of the memo but declined to comment further.

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