Around one thousand Credit Suisse managers bearing responsibility for its demise will see their bonuses cut by 50 to 60 million Swiss francs. Clawbacks are also under discussion.

During its meeting yesterday, the Swiss Federal Council instructed the Federal Department of Finance (FDF) to cancel or reduce by 50 to 25 percent all outstanding variable compensation for the top three layers of bank management, according to a statement Wednesday evening.

Clawbacks are also under discussion, with Credit Suisse instructed «to examine whether variable remuneration already paid out can be recovered, and report to the FDF and Finma on the matter.» 

Managers Under Scrutiny

The amount of bonus reduction depends upon the managers' level. Those on the executive board will see their entire bonus wiped out for 2022. Those a step below will face a 50 percent reduction, while those one rung below will get 25 percent less. For 2023, all variable compensation that accrues until the takeover by UBS is completed will be canceled or reduced for the same three levels.

The tiered approach «takes into account the most senior managers' responsibility for the situation at Credit Suisse.» Taken together, the cutbacks will result in about 50-to-60 million francs less in bonus payouts. 

Bearing the Brunt

Management is being made to feel the pain along with the rest of the bank's 49,000 employees. Current variable compensation is 645 million Swiss francs based on a share price of 76 centimes. When the bonuses were awarded, the compensation was worth 2.76 billion francs, leaving employees to bear a loss of more than two billion francs as a result of the drop in its stock price.

UBS Held to Account

UBS is required to include a criterion in its compensation model for those responsible for the liquidation of Credit Suisse assets affected by the federal guarantee to ensure the state loss guarantee isn't exercised. This is designed to provide an incentive to realize the best profit possible from the assets. It also has to take into account risk awareness and compliance with conduct when considering compensation.

The FDF will give all parties concerned the right to be heard before it rules on the decisions. How Credit Suisse and UBS implement the measures will be reviewed by Finma.