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Morning Coffee: UBS wants money back from Credit Suisse bonuses. Hong Kong bankers finally get shown some love

In the last days of Credit Suisse, plenty of decisions were taken where perhaps the best you can say of them is that they might have looked like the only available option at the time.  The brand was melting down, and the best bankers were leaving every day.  In order to try to hold on to some of the rainmakers in strategically important franchises, CS decided that it was going to pay what were called “upfront cash awards”.

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The logic of this was pretty simple – the share price was falling quickly, so there wasn’t much willingness on the part of the bankers to accept deferred shares.  In fact, the liquidity crisis was so bad that the bankers weren’t willing to accept deferred anything (and in fact this would have been the right call – Credit Suisse deferred compensation got wiped out in the UBS takeover).  They wanted cash on the nail, so that was what CS had to give them, subject to a three year “clawback” deal which meant that they had to return their retention awards if they left anyway.

It seems like a reasonable solution on paper, but like so many elegant financial solutions, it seems to have run into trouble in the real world.  The problem is that in the aftermath of the UBS takeover, a lot of the senior bankers did leave, and during that period, there was a lot going on.  Lots of them don’t seem to have remembered that they were meant to leave a cheque for Human Resources in the envelope with their security pass.

And now UBS is trying to enforce the clawbacks.  According to “people familiar with the matter”, the total amount of money that departing CS bankers have omitted to return could be the oddly specific amount of “less than 651 million Swiss francs”. 

In most cases, the bankers are likely to have either legitimately forgotten, or to have (not entirely unreasonably) decided that possession was nine-tenths of the law, and it was a global investment bank’s job to remember about the payments rather than theirs to remind them.  It doesn’t seem particularly likely that many bankers will have been unclear on the concept of a clawback, or to have thought that the demise of CS meant that the obligation had disappeared.

But apparently there are some former Credit Suisse people out there who are a bit more reluctant.  Some may have already spent or invested the money, others might not have remembered to negotiate a buyout clause as part of their signing agreement somewhere else.  UBS apparently has law firms “reaching out” to people, and will presumably be telling them that it’s not really possible to have a career at the highest levels of finance while also defaulting on a seven figure claim.

Let’s hope that this can all be sorted out without anyone’s Maserati needing to be repossessed. 

Elsewhere, there’s apparently going to be a top level summit with representatives of the Chinese government meeting executives at HSBC, Standard Chartered and other banks to talk about how to shore up Hong Kong’s status as a global financial centre.

If the officials are rattled by the extraordinary depth of the deal drought, the fact that several brokerages have closed down and the steady flow of market share to Singapore and India, perhaps they could consider giving the poor old bankers a break?  Part of Hong Kong’s problems relate to the successive blows of political instability, pandemic restrictions and global economic realignment.  But it’s hard to argue that there’s not also a set of problems stemming from the fact that being an investment banker in Hong Kong has just become steadily more and more unpleasant a way to make a living.

So maybe show the bankers a bit of love?  Stop criticising them all the time.  Let them wear a nice watch if they want to.  A little bit more partying and a bit less writing essays about the thought of President Xi might be what the Hong Kong market really needs.

Meanwhile …

There’s a sudden shift in sentiment in the markets along with the latest Federal Reserve guidance.  This couldn’t have come at a better time for investment banking employees; as the top management go into their huddles to think strategically about what they expect for 2024 and what headcount they retire, the mood music surrounding them will be positive. (Bloomberg)

… and if that wasn’t bullish enough a literal longhorned bull found its way onto the commuter rail tracks in New Jersey, apparently after having escaped from a slaughterhouse.  “Ricardo” is now safely in an animal sanctuary. (Reuters)

If you’re looking for a last minute present that’s rectangular and easy to wrap, and your family members have similar taste to the Davos set, here’s a list!  Bill Ackman recommends a book about living longer, Anthony Scaramucci a history of financial regulation and Nicolai Tangen a self-help book about living with your imperfections. (Bloomberg)

Jim Chanos is “not dead yet”, and you can quote him on that.  Having converted his hedge fund to a family office, he intends to keep on annoying Elon Musk, according to an interview which ranges over the highs and lows (or indeed, lows and highs) of a short-selling career. (Pensions & Investments)

All aboard the Jain Train!  A list of the latest senior hires made by Jain Capital Management, including a head of compliance who was previously deputy general counsel at Citadel and a former head of fixed income trading at Bank of America. (Bloomberg)

The Blackstone corporate Christmas video is out!  For the first four minutes, it’s up to the standard of previous years, with some genuinely funny comedy. Then it turns into what might be a parody of a cheesy corporate song or might be an actual cheesy corporate song. Don’t confuse them with BlackRock. (Youtube)

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AUTHORDaniel Davies Insider Comment

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