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The new panic for bankers who've left Credit Suisse in London

It used to be the case that when you lost your job in an investment bank, you took your severance pay and had a little rest before trying to find something new. That's still the case if you're a mere rank and file banker or trader. But if you're senior in London now, it seems your time out of the market is now fraught with worry.

The problem is the comparatively new rules on bonus clawbacks, which extend over a seven-year period. These were introduced in the UK in 2015 and apply to the 'material risk takers' who take significant risks for banks on the trading floor, as well as to senior investment bankers and risk and compliance professionals. Under the rules, bonuses can be clawed back for a seven-year period from people who earned over £500k, even they have already vested and been spent. 

The Bank of England's Prudential Regulation Authority (PRA) says the clawbacks apply in the circumstances below, which sound like they could potentially be applicable to Credit Suisse.

The concern is that senior Credit Suisse bankers and traders who have lost or will lose their jobs could conceivably find their historic pay seized by the regulator at a time when they have no earned income. The clawback rules apply equally to senior people who've left Credit Suisse and are now working elsewhere. For the past two years alone, that amounts to an average of around $500k if clawbacks were 100%.

Jane Mann, an employment partner at law firm Fox Williams, suggests it's not just Credit Suisse bankers suffering from the fear. Mann says she's already working for people who are subject to the long clawbacks but declined to comment on where they worked. In some cases, clawbacks are applied to people who were not culpable, says Mann: "We are challenging them every step of the way."

The worst case scenario now is that senior bankers who lose their jobs are hit with a multiyear clawback request for already spent compensation that applies to gross pay and includes tax - which they would subsequently need to reclaim from HMRC. 

Leaving a senior banking job isn't nearly as restful as it used to be.

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AUTHORSarah Butcher Global Editor
  • ph
    24 May 2023

    Some firms have long considered risk management and compliance to be secondary to making profits now. Some firms made an absolute joke of it. An excellent example is LIBOR - that the rate setting was a bad joke meant to create profit for firms, and bonuses for traders, was an open secret back many years - and you didn't have to be, for instance, a trader, to know about it. The basic order of the day, or decades, was to pretend to have compliance and risk management, even such basic things as BCP / DRP, but really not, because they took away from the bottom line.

    The only 'problem' I see here is that some people who had no say or control might get caught up in this. Being a whistleblower pretty much destroys one's career, along with pushback against corrupt activities.

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