After losing numerous senior bankers to Jefferies in 2020, Credit Suisse seems to have decided to copy a few things from Jefferies' compensation strategy.
The Swiss bank lost four FIG bankers to Jefferies in May, including Alejandro Przygoda, its global head of FIG. Another two went to Jefferies in July, and Jefferies then hired senior FIG debt banker Samir Dhanani in November. As we noted after the first wave of exits, Credit Suisse bankers' willingness to move to Jefferies probably had something to do with pay: specifically, Jefferies' tendency to pay large bonuses, highly linked to PnL, in cash.
With Credit Suisse due to announce its bonuses in early February and its bonuses due to be very bad, Credit Suisse has reportedly decided to pay higher cash bonuses too. And it's also decided to copy another innovation from Jefferies: if people leave after cash bonuses are paid, they will be clawed back again.
At Jefferies, people who leave within 12 months of receiving a cash bonus have the entire thing clawed back. If they leave within 25 months they have to repay 50%, and if they leave within 36 months they have to repay 25%. Worse, Jefferies' leavers are expected to repay gross amounts, including income tax.
Credit Suisse is paying is new "upfront cash award" to paid managing directors and directors earning more than $250k, with bonuses larger than $25k. It's not clear whether Credit Suisse also plans to clawback tax. Nor is it clear what proportion of bonuses it intends to retrieve if staff leave. Insiders say this hasn't been explained. The new policy has been presented at a high level to key employees in a slide labelled as highly confidential and seen by eFinancialCareers.
The slide says this year's Credit Suisse bonus pool will be down "significantly" due to 2021 "events" and pressure from the Swiss regulator, and that the impact of this reduction will be felt more dramatically among the managing directors and director class. To help ease their pain, directors and MDs will be paid a new share award vesting entirely in year three with a strong "motivational component."
Credit Suisse didn't respond to a request to comment on the new policy. One MD at the bank suggested it's a blatant attempt to shunt compensation costs into the future and to retain employees by force. "This is all about trying to show a lower 2021 bonus pool to shareholders and regulators," he said. "It's an accounting trick at our expense and people aren't happy."
Credit Suisse employees don't have to accept the new bonus format. They have until early February to sign up. If they don't, their bonuses will be paid only in deferred components and no cash or other payment will be made to compensate for the loss of the element that could have been clawed back.
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