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Credit Suisse to Slash Bonus by 60% Under FINMA Rule?

Switzerland-based Credit Suisse Group AGCS might need to slash management bonuses by 60% as regulatory pressure continues to limit the company's flexibility. Notably, Swiss Financial Market Supervisory Authority or "FINMA" requires financial institutions, which are likely to incur a loss, to cancel bonuses.

Why is Credit Suisse Likely to Incur a Loss?

Concurrent with its third-quarter 2015 earnings release on Oct 21, Credit Suisse announced that it will record a goodwill impairment charge of CHF 6.3 billion in the fourth quarter of 2015. This will likely result in an annual loss of CHF 2.6−2.8 billion for the company.

As such, the Schweiz am Sonntag estimates that Credit Suisse will need to cut down its yearly bonus by as much as 60% in order to comply with the above-mentioned FINMA rule.

The decision to write down goodwill comes as part of the company's efforts to streamline its investment banking business for driving "higher profitability with lower capital usage and lower volatility in earnings". Notably, the goodwill relates to the acquisition of Donaldson, Lufkin & Jenrette, a U.S.-based investment bank, back in 2000.

Apart from restructuring its investment banking business, the company plans to reorganize its operating structure in three geographic divisions. The new structure includes Swiss Universal Bank ("CHUB"), Asia Pacific ("APAC") and International Wealth Management ("IWM") divisions. Notably, Credit Suisse intends to hold a partial initial public offering of its Swiss unit by 2017.

Last August, Deutsche Bank AG DB 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 #4 (Sell).

Banco Macro S.A. BMA and Grupo Financiero Galicia S.A. GGAL are better-ranked foreign banks, both sporting 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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