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Credit Suisse to Review Top-Tier Compensation Structure

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As a result of the restructuring overhaul announced in Oct 2015, Credit Suisse Group AGCS has brought its management compensation structure on the table for review. According to Bloomberg, the company, citing a share sale prospectus issued on Monday, is expected to appraise the payment structure for its top 12 executives.

Per the prospectus, Credit Suisse stated that, "As a result of the comprehensive changes in our strategic direction and organizational structure announced on Oct 21, 2015, including management changes, the 2015 compensation structure is under consideration."

Notably, last month, Credit Suisse appointed 6 new members in its executive team, while 4 others were asked to leave. Further, the company's newly appointed Chief Executive Officer Tidjane Thiam discarded the use of cost-to-income and return-on-equity ratios as profitability targets. Notably, both metrics were previously used by the company to evaluate management performance.

Apart from certain anticipated modifications in the compensation structure, Credit Suisse might also announce a cut in management bonus for 2015. This is because the company is facing regulatory pressure from Swiss Financial Market Supervisory Authority or "FINMA", which requires financial institutions that are likely to incur a loss, to cancel bonuses.

In this regard, Schweiz am Sonntag estimates that Credit Suisse will need to cut down its yearly bonus by as much as 60%, since the company anticipates to record an annual loss of CHF 2.6−2.8 billion for 2015.

Separately, in the same prospectus, Credit Suisse disclosed that it has received civil investigative demands from the U.S. Department of Justice, regarding matters related to credit default swaps. However, this information was previously disclosed in the company's 2014 Annual Report.

Apart from Credit Suisse, Frankfurt-based Deutsche Bank AG DB has also been reshuffling and reorganizing its management structure. Both these banks aim to achieve higher efficiency, reduction in complexity, and better resilience as well as resolvability. Notably, last August, Deutsche had to reportedly freeze the bonus of its senior executives, including Co-CEO John Cryan, amid similar concerns over its financial position.

Credit Suisse currently holds a Zacks Rank #5 (Strong Sell).

Better-ranked foreign bank include Banco Macro S.A. BMA and Grupo Financiero Galicia S.A. GGAL . Both these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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