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)