Credit Suisse may cut bonuses by 55%

Credit Suisse Group, Switzerland’s second-largest bank, plans to cut bonuses for investment bankers by about 55 per cent following $13.6 billion of credit writedowns, two people familiar with the situation said.

Credit Suisse, along with New York-based Morgan Stanley and UBS, has already added so-called clawback provisions that allow the bank to recoup part of the payment in later years if an employee leaves or is found to have behaved in ways that hurt the company.

Marc Dosch, a spokesman for the Zurich-based bank, declined to comment. The investment bank employed about 21,300 people at the end of September. UBS, Deutsche Bank and other banks are slashing bonuses after the industry racked up more than $1 trillion of losses and writedowns on credit-related assets. Deutsche Bank, Germany’s biggest lender, will cut its bonus pool by about 60 per cent after reporting a record loss, a person with knowledge of the situation said yesterday.

The industry is under political pressure to curb pay as governments consider plans to remove toxic assets that have clogged lenders’ balance sheets.

“The banks have yet to adjust to the political time bomb that compensation rounds are going to cause in the world outside,” Shaun Springer, chief executive officer of London- based Napier Scott Executive Search said by telephone. “Banks are politically aware of the sentiment out there.”

Bonuses forgone
Credit Suisse said in December that Chief Executive Officer Brady Dougan, Chairman Walter Kielholz and Paul Calello, head of the investment bank, will forgo bonuses for 2008 after the bank lost about 3 billion Swiss francs ($2.6 billion) in October and November. The bank, which has announced 7,420 job cuts, will also use about $5 billion of illiquid securities such as leveraged loans and commercial mortgage-backed debt to help fund bonuses for managing directors and directors within the securities unit.

UBS, the European bank with the biggest writedowns and losses from the credit crisis, was told to reduce bonuses after the Swiss government gave the country’s biggest bank a $59.2 billion lifeline. The bank said last week it cut its bonus pool for the whole company, excluding US brokers, by more than 80 per cent to less than 2 billion francs.