After Credit Suisse announced that its rival UBS would acquire the Swiss lender for $3.2 billion, the bank wrote a memo to employees promising that nothing had changed in the short term.
The bank wrote that there would be “no changes” to payroll, and it would pay outstanding salary and bonuses as previously promised.
However, Swiss authorities, who helped provide billions of dollars in assistance and guarantees to shepherd the deal through, have a different idea.
On Tuesday, Swiss regulators said that Credit Suisse would have to “temporarily” suspend handing out yet-to-paid bonuses awarded before 2022, citing a provision in Swiss law that allows it to intervene in remuneration decisions “if a systemically important bank is granted direct or indirect state aid from federal funds.”
Bonuses awarded for 2022 would be left alone, with authorities citing “legal certainty” and a wish not to punish employees who were not to blame for the current crisis. That may be a moot point, however, as some of Credit Suisse’s deferred compensation may not be worth much anyway: the company’s share awards, for example, are now worth far less following the collapse in Credit Suisse’s share price over the past week.
Credit Suisse’s executive board waived its 2022 bonuses on Monday, according to the Swiss government.
On Sunday evening, UBS offered to buy Credit Suisse for $3.2 billion, far less than what the troubled Swiss bank was worth at market close the Friday before. The deal was shepherded by Swiss regulators, and comes with a hefty price tag: the government offered $109 billion in government assistance and guarantees, coming out to about $13,500 per Swiss citizen and on top of an additional $100 billion liquidity line from the Swiss central bank.
Regulators also passed a waiver that allowed the deal to go through without a shareholder vote, and completely wrote off $17 billion in risky Credit Suisse bonds.
Yet Swiss politicians are upset about the rescue of the bank. The country’s largest party, the rightwing Swiss People’s Party, accused Credit Suisse bankers of taking “millions in pay without taking responsibility.”
Credit Suisse did not immediately respond to a request for comment.
Business as usual
The suspension of bonuses will likely dampen morale at Credit Suisse, already battered by restructuring and the pending acquisition by UBS.
Credit Suisse had announced job cuts of around 9,000 last October as part of a restructuring plan. The final tally after the UBS acquisition may be higher, as UBS Chairman Colm Kelleher told reporters Sunday that he intends to “downsize” Credit Suisse’s investment bank division.
“Maybe UBS will turn up to find they have bought empty offices,” one Credit Suisse banker griped to the Financial Times.
Headhunters told Bloomberg that their phones had been ringing with Credit Suisse bankers looking for new opportunities as news of the deal with UBS unfurled. Some Credit Suisse bankers had hoped to join Credit Suisse First Boston, a planned spin-off of an investment bank unit, yet UBS is looking for ways to end that deal with Wall Street dealmaker and former Credit Suisse board member Michael Klein, reports the Financial Times.
Still, Credit Suisse leadership is trying to continue with “business as usual”, encouraging staff to go to work in an internal memo on Sunday.
That’s leading to some surreal scenes. On Tuesday, just two days after the UBS rescue package was announced, Credit Suisse kickstarted its Asian Investment Conference in Hong Kong, with talks from high-profile economists, CEOs, and TV show host Bear Grylls.
The conference’s theme? “Embracing Reality”
