Credit Suisse extends scheme to pay top staff bonuses in cocos
CREDIT Suisse has changed the way it offers bonuses to top staff in a new bid to make employees take on risk, in a way which meets the wave of new regulations.
Part of the awards will be given in contingent convertible (coco) bonds.
The bank is unwilling simply to offer cash or shares and instead wants to tie bankers’ remuneration more closely to the fortunes of the business.
As a result in 2012, more than 5,000 staff were offered bonuses linked to a portfolio of the bank’s credit exposures.
The aim was to make the staff take on some of the risk instead of the bank itself, giving them long-term incentives to work in the interests of the bank and its shareholders. The bonus plan also offset some of the bank’s capital needs.
However, since then the rules on capital have changed.
As a result last week Credit Suisse sent a memo to staff offering two different alternatives to the previous arrangement.
Now the staff can choose either contingent capital awards, where the money is only paid to staff as long as the bank’s capital position remains strong.
Or they can choose a capital opportunity facility, a seven-year structure which is linked to the performance of a portfolio of risk transfer transactions.