Credit Suisse withdraws attempt to secure employee bonuses

Credit Suisse has given up trying to save its employees’ bonuses, which were wiped out after the bank’s rescue by rival UBS.

More than $400 million of deferred pay for Credit Suisse’s middle managers was wiped out as a result of the state-orchestrated takeover and several bankers are preparing lawsuits against Swiss regulator FINMA, the Financial Times reported this week.

Credit Suisse appealed to the Federal Administrative Court of Switzerland for the protection of the bonuses, which were linked to additional Tier 1 bonds, which were also liquidated. But the St. Gallen court revealed on Tuesday that the bank had withdrawn its appeal.

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

The bonus dates back to 2014 when managing director and director level employees in the bank were offered a contingency capital award as part of their remuneration. The unorthodox awards were designed to mimic AT1s, which could be converted to equity or written down to zero if the bank was in trouble.

CCA generally constitutes about 10 percent to 15 percent of a manager’s total bonus and after three years. They also provided two interest payments in a year. In 2021, the last year they were awarded, more than 5,000 Credit Suisse employees will receive them.

Credit Suisse declined to comment on its withdrawn appeal.

As part of its efforts to protect employees’ bonuses, Credit Suisse told FINMA that it did not agree with its decision to write off AT1s.

The court also noted that 230 appeals involving 2,500 appellants had been received against FINMA’s decision to cancel AT1 devices.

Law firms around the world, notably Quinn Emanuel in Zurich and Pallas in London, have signed up bondholders representing more than a third of the $17bn invested in AT1 when they were cancelled.

AT1 is a type of hybrid debt instrument that was created after the 2008 financial crash to give banks greater capital flexibility in the event of a crisis.

UBS President Colm Kelleher was asked on Wednesday morning about FINMA’s decision to cancel AT1s after other regulators said they would not have done so.

“With respect, read the prospectus,” Kelher said at the Wall Street Journal event. “It was very clear in the Swiss prospectus that viability was an erased issue – very clear.”

Separately, the Swiss government on Tuesday confirmed plans to cut full bonuses for nearly 1,000 of the most senior bankers at Credit Suisse for 2022 and 2023.

Under proposals tabled last month by Switzerland’s Federal Council, the bonuses of Credit Suisse’s executive board members would be cancelled, while staff below level one would face a 50 per cent cut. Employees below this will get a 25 percent cut.

“In addition, Credit Suisse should examine the possibilities of recovery of remuneration already paid to the members of the group management since 2019 and report on the matter to the (Federal Finance Department) and FINMA,” the ministry said in a statement. should do.”