Credit Suisse has offered a new bonus scheme to transfer risk from the bank to employees following an intervention by regulators.
As part of the move, the 5,500 senior bankers who were offered the scheme in 2012 will now be offered two replacement plans to the previous arrangement.
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Under the new plans, employees can receive so-called Contingent Capital Awards (CCAs) similar to those awarded last month as part of their deferred pay for 2013 or they can choose to have their bonuses linked to a new vehicle called a Capital Opportunity Facility.
The capital opportunity facility is a seven-year structure which is linked to the performance of a portfolio of risk transfer transactions, while CCAs are bonds which would be wiped out if the bank’s capital falls below a specific level.
According to the schemes, the employees will not be paid out bonuses until 2021 even though they receive annual payments of 6.5% of the deferred sum as a coupon.
The schemes have helped a bank to cut its exposure to US$17 billion of uneasy loans and derivatives as well as allowed the bank to save about US$1.4 billion on income or share-based reward payments.
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By GlobalData
