Now that Credit Suisse is clawing back cash bonuses like Jefferies does, a standard clause in its employment contract has taken on a new meaning for some new hires.
Like most banks, Credit Suisse's employment contract contains a clause stating that the bank may impose conditions relating to forfeiture and clawback on any award. Sources say this is standard wording, but at Credit Suisse it's raising a few eyebrows.
Under pressure from Swiss banking regulator following last year's losses, Credit Suisse has cut its bonus pool by 32% and is paying a higher proportion of 2021 bonuses to directors and managing directors in cash. That cash is subject to a clawback if the Ds or MDs leave, with sources saying that it 'vests' month by month over a 36-month period. - Only if recipients stay the full three years will they escape the cash clawback altogether. And if any of the cash bonus is paid back, Credit Suisse (like Jefferies) will require repayment of the gross amount, before tax - leaving recipients to negotiate a refund of the tax they've already paid.
Credit Suisse's cash clawbacks don't apply everywhere - they're not thought to be enforceable in France, for example, and they're only supposed to be for the 2021 bonus round. However, the bank's willingness to change the structure of bonuses at short notice is causing concern among new hires encountering the clause in its employment contract.
"This seems to suggest they can impose any clawback they like on bonuses," says one risk manager contemplating a role in New York. "It's effectively saying they can do whatever they want."
Credit Suisse declined to comment for this article. The clause is understood to be nothing new and headhunters said it's common to all banks' contracts now.
However, another headhunter said it's not so much the potential for clawbacks that are the issue for candidates joining Credit Suisse, but the fact that capital is being withdrawn from the investment bank in the short term. At last year's investor day, Credit Suisse said it planned a reduction in capital allocated to the investment bank from $13bn at the end of 2021 to $11bn in 2022 before increasing it again to $13bn-$13.5bn in 2024. The concern is both that the promised increase won't actually happen, and that Credit Suisse is missing opportunities in areas like leveraged finance and high yield underwriting while it cuts capital allocation in the meantime.
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