Credit Suisse withdraws attempt to protect staff bonuses

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Credit Suisse has given up trying to save its staff bonuses that were scrapped after the bank’s bailout by rival UBS.

Just over $400 million in deferred pay for Credit Suisse middle managers has been reduced to zero as a result of the state-orchestrated takeover and several bankers are preparing lawsuits against Finma, the Swiss regulator, for their losses, the Financial Times reported this week.

swiss credit had appealed to the Swiss Federal Administrative Court to protect the bonuses, which were linked to additional Tier 1 bonuses that were also removed. But St Gallen court revealed on Tuesday that the bank had withdrawn its appeal.

“The withdrawal has the effect of making the initiated proceedings irrelevant and consequently the FAC removed them from the list of cases,” the court said, adding that a further appeal could be made to the Swiss Federal Supreme Court. .

The bonuses date back to 2014, when the bank’s managing director and senior-level staff were offered a contingent capital award as part of their remuneration. The unconventional awards were designed to mimic AT1s, which could be converted to principal or reduced to zero if the bank was in trouble.

CCAs typically make up 10 to 15 percent of a manager’s total bonus and vesting after three years. They also provided two interest payments a year. In 2021, the last year in which they were granted, more than 5,000 Credit Suisse employees received them.

Credit Suisse declined to comment on its withdrawn appeal.

As part of its attempts to protect staff bonuses, Credit Suisse told Finma that I did not agree with its decision to amortize the AT1.

The court also said it had received 230 appeals with 2,500 appellants against Finma’s decision to cancel the AT1 instruments.

Law firms around the world, notably Quinn Emanuel in Zurich and Pallas in London, have hired bondholders representing more than a third of the $17 billion that was invested in the AT1s when they were cancelled.

AT1s are a type of hybrid debt instrument created after the 2008 financial crisis to give banks greater capital flexibility in the event of a crisis.

UBS Chairman Colm Kelleher was asked on Wednesday morning about Finma’s decision to cancel the AT1s when other regulators said they would not have done so.

“Respectfully, please read the prospectus,” Kelleher said at a Wall Street Journal event. “It was very clear in the Swiss prospectus that viability was a knock-out issue, very clear.”

Separately, the Swiss government on Tuesday confirmed plans to cut the entire bonuses of around 1,000 of Credit Suisse’s top bankers for 2022 and 2023.

Under proposals put forward by the Swiss Federal Council last month, members of Credit Suisse’s executive board would see their bonuses cancelled, while lower-level staff would see a 50 percent cut. Staff at a lower level would receive a 25 percent reduction.

“In addition, Credit Suisse must examine the possibilities of recovering the remuneration already paid to members of the group management since 2019, and inform the [Federal Department of Finance] and Finma on the matter,” the ministry said in a statement.