The Swiss Federal Council has instructed the Federal Department of Finance (FDF) to cancel, or reduce by 50% or 25%, all outstanding variable remuneration for the top three levels of management at Credit Suisse. The bank also has to examine whether variable remuneration already paid out can be recovered, and report to the FDF and FINMA on the matter.
UBS is obliged to ensure that its remuneration system continues to give appropriate consideration to risk awareness and includes as a criterion the successful, i.e. most profitable possible, realisation of the Credit Suisse assets covered by the state loss guarantee.
On 19 March 2023, the Federal Council approved a package of measures to support the takeover of Credit Suisse by UBS. Among other things, this includes federal guarantees for the liquidity assistance provided by the Swiss National Bank to Credit Suisse (CHF 100 bn) and for subordinate protection against any losses incurred by UBS when selling certain Credit Suisse assets (CHF 9 bn).
Article 10a of the Banking Act stipulates that the Federal Council shall impose remuneration-related measures if a systemically important bank is directly or indirectly granted state aid from federal funds. Following a temporary suspension of deferred variable remuneration on 21 March 2023, the Federal Council has now decided on definitive measures.
At Credit Suisse, all outstanding variable remuneration up to the end of 2022 will be cancelled for the highest level of management (Executive Board), reduced by 50% for members of management one level below the Executive Board and reduced by 25% for members of management two levels below the Executive Board.
This differentiated approach takes account of the most senior managers’ responsibility for the situation at Credit Suisse. This will affect around 1,000 employees, who will be deprived of a total of approximately CHF 50-60 million with these measures.
The total amount of deferred variable remuneration for all of Credit Suisse’s some 49,000 employees is currently CHF 635 million (with a share price of CHF 0.76); when this deferred variable remuneration was awarded to the employees, it was worth CHF 2.76 billion.
In other words, all employees have already had to bear a total loss of more than CHF 2 billion due to the drop in Credit Suisse’s share price. In addition, for 2023, all variable remuneration accruing until completion of the takeover by UBS will be cancelled or reduced for the top three levels of management. Credit Suisse is also obliged to examine the possibility of recovering variable remuneration already paid out and to report to both the FDF and FINMA on the matter.
UBS is required to include non-utilisation of the federal guarantee as a criterion in its remuneration system for those responsible for the realisation of the Credit Suisse assets covered by the state loss guarantee. This is intended to provide an incentive to achieve the most profitable realisation possible of those assets. In addition, UBS has to ensure that its remuneration system continues to give appropriate consideration to factors such as risk awareness and compliance with the code of conduct.
The FDF will grant the parties concerned the right to a hearing before it issues the corresponding decisions for the attention of Credit Suisse and UBS. FINMA will review the banks’ implementation of the measures.
