Thomas Gottstein hasn’t had an easy start as CEO of Credit Suisse. While the bank was doing well enough performance-wise, the bad news came in thick and fast. This may yet impact the bonus payments of his staff.

It was really all bad news recently. Last week, the Swiss attorney general charged Credit Suisse (CS) for an alleged case of money laundering. In the first week of December, the bank announced a write-down of $450 million related to a U.S. hedge fund.

Also, CS faces a judgment of as much as $680 million in connection with a legal battle with bond insurer MBIA over guarantees on U.S. residential mortgage-backed securities, or RMBS. In the first half of the year, CS admitted to the fact that Hong Kong client Lu Zhengyao was a fraudster, which may cost the bank some $100 million.

Before one forgets, Thomas Gottstein’s nomination as CEO in February came after his predecessor, Tidjane Thiam, stepped down following a spy scandal that had rocked the bank.

New Start in 2021

Despite all the negative news pounding the Zurich-based bank, it still managed to perform well in the corona-year of 2020. It also paid the promised dividend (in two installments) and promised to restart its share buyback program. Chief Executive Gottstein is optimistic that the coming year will be one of growth.

He repeated the upbeat forecast he made during last week’s investors’ day in an interview with the «Financial Times» (behind paywall), which wrote on Monday that the top executive aimed for a «clean slate» in 2021.

Huge Bonuses Unpopular With People

One of the key questions he will have to solve first will be the tricky issue of bonus payments. The bank has performed well, but the economy at large was hard hit by the pandemic. Paying out huge amounts in bonuses to investment bankers wouldn’t go down well with the general public.

Gottstein had said as early as in March, during the first wave of the pandemic, that bonuses weren’t cast in stone at CS. He recognizes the need to balance the demands of his staff with what is acceptable to the population (which in no small number owns an account at the bank), a population that is struggling to make ends meet.

Lloyds' Decision to Cancel the Bonus

Gottstein told the London-based broadsheet that it was too early to make a statement regarding bonus payments, but that in general bonuses will be smaller due to considerations of solidarity.

While the sensitive question of bonus payments for banking staff has not been discussed in depth in Switzerland, U.K.-based banks have already gone a step further. Lloyds Bank for instance has canceled bonus payments for 2020 because its profit in retail and credit has plunged. CEO Antonio Horta-Osorio, who will replace Urs Rohner as chairman of CS in 2021, has foregone his bonus this year.

Bonus Culture Under Review in Switzerland

By contrast, Barclays promised to increase the bonus for investment bankers. Regulators also have been discussing the issue, with both the European Central Bank (ECB) and the Financial Services Authority (FSA) stating that dividend payments will be acceptable next year if the bonuses for 2020 are kept at a strict minimum.

The bonus culture has come under pressure in recent years in Switzerland. Migros Bank became the first bank operating across Switzerland to abolish the personal bonus payment system Raiffeisen Switzerland announced its intention to only reward teams going forward. This will promote a culture where staff pursues a common goal instead of individual targets.