Credit Suisse is paying nearly 400 million Swiss francs ($432 million) to retain key employees in 2021 – more than eight times as much as the year before – as it looks to stem the brain drain in the wake of successive scandals.
According to its annual report, the Swiss bank paid so-called "retention incentives" in response to "significant external pressure on some of our key talent.
The CHF 395 million paid out to 652 key employees last year was up from CHF 40 million in 2020, an increase of 887%, with an average spend of CHF 605,000.
At the same time, 168 people received guaranteed bonuses – agreed to be paid regardless of performance – up from 67 a year ago. At CHF 63 million, these amounts represent an increase of more than 200% over 2020.
The awards show the pressure Credit Suisse is under to retain key employees amid a mass exodus of deal aggregators and other senior staff amid numerous crises. The firm took a $5.5 billion hit last March when family office Archegos Capital collapsed, losing far more than its competitors and still assessing the impact of its links to supply chain finance firm Greensill Capital.
Retention incentives – a one-time payment to discourage employees from leaving – are paid in shares that vest over three years. Across the bank, however, Credit Suisse slashed its overall bonus pool by 32% to CHF 2 billion.
Last year, CEO Thomas Gottstein's pay fell 43 percent to 3.8 million Swiss francs, meaning CFO David Mathers was the highest paid executive with 4.6 million Swiss francs. Credit Suisse's successive scandals meant it withdrew $70 million in bonuses awarded to 23 people in previous years.
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Investment banks, including Barclays and HSBC, have raised bonuses for key employees known as significant risk takers, whose actions could affect the bank's overall risk profile. However, Credit Suisse has been cutting bonuses for these employees.
In 2021, it paid an average bonus of CHF 368,918 to approximately 1,500 significant risk-takers, a decrease of 41% compared to the previous year. The overall bonus for these employees totaled CHF 546 million, a decline of 39% compared to the previous year.
However, in another example of how Credit Suisse continues to pay talent, the average compensation for significant risk-takers was CHF 1 million, only slightly below the CHF 1.1 million of a year ago, as salaries increased.
Credit Suisse has restructured compensation to bring it closer to long-term risk-taking. At the board level, the bank says bonuses will now be determined by an "individual scorecard," with at least 70% of the bonus paid in the form of long-term stock awards. The bank said in its compensation report that bonuses will be based on 70% of performance, but the remaining 30% will be based on "ESG-related factors.
Last year, Credit Suisse lost at least 55 senior deal aggregators in a war for talent that led to a spike in salaries and a spike in bonuses to the lowest level since before the 2008 financial crisis. However, the bank has been working to replace them, hiring about 50 senior investment bankers in the past year.
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The Swiss bank's competitors, including Goldman Sachs and JPMorgan Chase, have raised bonuses for top deal aggregators by 50%. Credit Suisse has introduced special incentives for senior staff to compensate for pressure on its bonus pool. All of its directors and managing directors are being asked to sign a new plan that pays more cash up front but requires them to repay it if they leave within three years.
The new bonus structure has caused discontent among some employees, who complain that it is too punitive and demand that they be paid based on total bonuses rather than after taxes. Credit Suisse also offered employees one-time stock awards totaling CHF 497 million to implement its new three-year strategy announced in November.
UBS paid an average bonus of $1.6 million to about 700 top bankers, essentially unchanged from last year. HSBC raised bonuses for its significant risk-takers by 53 percent last year, while U.K. rival Barclays boosted variable pay for these key employees by 30 percent as pay grew more.
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