UK
Credit Suisse has come up with what at first sight appears to be the ultimate in bonus nightmares. As of this year, all directors and managing directors at its investment bank will receive 70-80% of their bonuses in the form of ‘illiquid assets’ (AKA around $5bn of the bank’s most noxious leveraged loans and CMBS).
These toxic entities will be deposited in a promisingly named ‘Partner Asset Facility,’ units of which will be allocated in lieu of normal bonus payments.
85% of the facility will be kindly backed by CS, leaving bankers exposed to the first 15% of losses. Payouts will only start after five years and the facility will mature over eight years. In the meantime, employees can console themselves with a dividend of 2.5% over LIBOR.
To make matters even worse, Bloomberg reports that under the new system, CS will have the right to recoup ‘some’ of this dividend for up to two years if an employee resigns. The Wall Street Journal says that CS bankers are ‘livid’ about the new arrangement and are questioning its legality. However, some commentators have pointed out that things might not be too bad, just as long as the assets going into the PAF are valued low enough to provide decent upside in the long(ish) run.
“Bonuses based on profits that were not real are not bonuses – they are the proceeds from theft, and as crime, should be disgorged.” (Big Picture)
Offer to take a sabbatical or pay cut instead of redundancy. (Financial News)
No bonuses for Dimon or Rubin. (Reuters)
From investment banking to office management. (The Times)
Wigley walks from Merrill. (Telegraph)
Natixis scaling back in Asia and the US. (Bloomberg)
RBS cutting 70 Asia Pac bank jobs (Bloomberg)
Morgan Stanley cuts prime brokers in Tokyo (Bloomberg)
Goodbye to Credit Suisse Asia bond trading head (Financial News)
Excellent idea Credit Suisse..however as they are likely to be valued at the bare minimum initially…wait for the S$% Storm when the proceeds do divest and are worth a significant amount of money.This smacks of greedy Bankers attempting to look as tho they are prepared to suffer as the rest of us when most people realise this idea is a fairly no brain winner ( dependent on initial valuation.)This sort of thing really grips me. The “Brains” behind this idea should be named and shamed for Greed of the first order
agree….that’s banking at its best..!
I recommend CS bankers to leave the firm, because this is not acceptable… CS has always been a sort of second tier bank, doing crappy jobs… then, they copied American banks and started to be a serious firm… but at the end it resolved to be a bad move… leave CS, guys… don’t waste your time in a loser firm…
Does that mean the directors in CS = TARP?
Very sneaky. Very good. Everyones a winner.
This is a great idea. It takes illiquid assets off the banks balance sheet and means it can return / does not need as much capital. There are still genuine producers at these firms and from a competitive standpoint need to be retained. No one should be crying over this, the reality is you were either going to get a fraction or this. As for the public – they should be happy steps are being taken by banks to deleverage themselves to the publics benefit. The taxpayer should see their investment increase in value , and with less leverage , the banks will be able to lend sooner rather than later.
my initial reaction was: oh great, another theatrical sackcloth&ashes gesture.
but the more i think about it, the more i like it. those are the assets which are creating the problems for the bank, and those assets were inflicted on the bank by IB. so this boils down to:
“you thought these were such a great idea for us to invest in? well, now YOU’RE invested in them too. we’re putting your money where your mouth was. you’d better hope you were right, eh?”
dd it certainly doesn’t boil down to that. Much more likely it boils down to
“Some guy on a different floor to you who you have never met and has since been sacked decided these were such a great idea for us to invest in? Well, now YOU’RE invested in them too, despite the fact that you had absolutely nothing to do with it, you beat yourself up working 14 hours a day all last year and made a profit, and you would have hacked that guy’s head off if you had known what he was doing in the first place”.