Want your performance bonus? Then wait. This is what Swiss
Credit Suisse Group AG
) is asking its bankers to do.
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In an internal memo issued to its staff, Credit Suisse announced
doing away with the earlier bonus pay structure 'Partner Asset
Facility (PAF) 2012', which was linked to performance of the
bank's derivatives portfolio. As replacement, the company has
offered two alternative schemes to nearly 5,500 bankers.
The bankers can opt for Contingent Capital Awards (CCAs), under
which bonus will be awarded in bonds of sort that will be
eliminated in case Credit Suisse's core Tier 1 capital ratio
drops below 7%. Further, the settlement will be made either by
cash payment of fair value of CCAs at that time or physical
delivery of an actual contingent capital security. This
contingent capital security can be held thereafter or sold in the
The second option that the bankers have is Capital Opportunity
Facility (COF). This is a seven-year scheme linked to the
performance of a portfolio of risk transfer and capital
mitigation transactions. The portfolio will be chosen by the PAF
management team. Under the terms, bonus will not be paid before
2021 though the bankers will get yearly payment of 6.5% of the
deferred amount as a coupon.
Credit Suisse had to provide an alternative bonus payment scheme
as the previous one failed to meet the new capital regulatory
requirements. Moreover, other banks including
The Royal Bank of Scotland Group plc
) have paid a portion of their bonus using similar 'bail-inable'
Credit Suisse has taken a step in the right direction by
scrapping the earlier bonus scheme linked to risky assets. By
linking bankers' pay to the overall company's performance and
other specific areas, it will prevent employees from taking undue
Currently, Credit Suisse carries a Zacks Rank #3 (Hold).