• 05 Feb 2013 at 1:47 PM

Bonus Watch ’13: UBS

The Swiss bank will reportedly announce today that it’s going to be doing things a little differently around here re: compensation. One, deferrals will start at $250,000 and two, rather than being paid in UBS stock, the non-cash portion of 6,500 senior employees’ bonuses will come in the form of subordinated debt that can and will be wiped out in the event the amount of capital on hand falls below the level required by EU regulators, putting the onus on everyone to make sure no one pulls an Adoboli (and avoids multi-billion dollar fuck-ups in general). Half-Adobolis only moving forward, please.

The new bonus structure for 6,500 of UBS’s highest earners will make Switzerland’s largest lender by assets the first to follow recommendations by an EU commission led by Finnish central banker Erkki Liikanen, paving the way for others in the industry to follow its lead. The commission last year called for bonuses to be partly based on “bail-inable” debt that can be converted to equity or wiped out in the case of trouble. Debt instruments have been used for bonuses by several banks including Royal Bank of Scotland and Credit Suisse in the past few years but were mostly linked to specific and troubled legacy assets. By contrast, UBS’s debt bonus will be written down to zero should the bank’s regulatory capital fall below 7 per cent or in the case of a “non-viability” loss. It will pay a market-based interest rate and will fully vest after five years, people close to the situation said. Analysts said UBS might become a trailblazer for other banks under pressure from investors and regulators to more closely align pay with all stakeholders, including creditors. Such debt instruments increase a bank’s regulatory capital while squaring the circle to align seemingly conflicting demands of investors, regulators and employees.

UBS Leads Way With Bonuses Shake-Up [FT]

25 comments (hidden to protect delicate sensibilities)
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Comments (25)

  1. Posted by UBS Quant via S&P | February 5, 2013 at 2:13 PM

    Great, just when I thought things couldn't get any worse.

  2. Posted by Guest | February 5, 2013 at 2:28 PM

    As if working for UBS wasn't already part of a running joke.

  3. Posted by Semantics 101 | February 5, 2013 at 2:35 PM

    "Non-viability": yep, that's what the company is right about now.

  4. Posted by Guest | February 5, 2013 at 2:50 PM

    I'm in the market for UBS subordinated debt to balance my portfolio. Paying top dollar. Call me.

  5. Posted by Im_a_Dude | February 5, 2013 at 2:54 PM

    leave it to politicians to come up with a worse structure…

  6. Posted by Advantage Fund LP | February 5, 2013 at 3:29 PM

    Huh, didn't know John Paulson was a Dealbreaker commenter.

  7. Posted by be relevant | February 5, 2013 at 4:12 PM

    Can you please post more useful information, ie, actual bonus figures?

  8. Posted by Quant me maybe.... | February 5, 2013 at 4:35 PM
  9. Posted by Quant me maybe | February 5, 2013 at 4:36 PM
  10. Posted by guest | February 5, 2013 at 4:43 PM

    Actual bonus figures have not come out yet but you keep winning it!

  11. Posted by Sir Mix a Lot | February 5, 2013 at 4:58 PM

    Im good with the UBS bonus figure.

  12. Posted by Quant me maybe | February 5, 2013 at 5:30 PM

    and at my firm,

    <img src="http://1.bp.blogspot.com/-cpHnfO1stkU/TzgWKrC4yVI/AAAAAAAAGyg/b5SXHCEMrZw/s320/lipstickpig.jpg&quot; Height="50%" Width = "50%" />
    They just put some lipstick on the pig and called it a day.

  13. Posted by Guest | February 5, 2013 at 6:00 PM

    smeifdiofv yes

  14. Posted by Guest | February 5, 2013 at 6:32 PM

    Is it me or does that UBS figure looks fat and juicy?

  15. Posted by Gnome | February 5, 2013 at 6:59 PM

    Message was as follows:
    – bonus pool sucks and will suck going forward
    – structure sucks. May get worse.
    – likely only 50% will get any meaningful bonus anyway; feel free to start pack your belongings
    – current bonus pool may be impacted by results from years past and there is no statute of limitations applied to screwing current employees
    – clawbacks are in effect. Beware, they are sharp and dangerous
    – company still thinks they have a viable ibank. Could be wrong, but don't really care either way

  16. Posted by Andrea Orcel | February 5, 2013 at 8:12 PM

    – if you voluntarily own shares in this firm, you're retarded
    – if you rely on this firm to manage your money, you're retarded, their track record speaks for itself
    – if you work there and think they are going to pay you fairly this year or ever in any group, front to back, you're retarded
    – if you are a manager or board member and think any of your remaining talented staff is going to stay with you for the good of the company, you're retarded
    – if you are a manager or board member and think you'll have a job or company to manage in the near future, you're retarded, it's over, the place is unable to get out of its own way

    godspeed retards, keep fucking that chicken!

  17. Posted by Guest | February 5, 2013 at 10:17 PM

    You're not Andrea, but she fired you didn't she?

  18. Posted by Im_a_Dude | February 5, 2013 at 11:08 PM

    Thank. Now I know why DB was crashing today

  19. Posted by Guest | February 6, 2013 at 4:06 AM

    Crashes every day – clue is in the company name – breaking media

  20. Posted by Longjohnson | February 6, 2013 at 6:32 AM

    The board should've recommended to ax all
    Md's. this place operates more like a govt bureaucracy.

  21. Posted by UBS HR | February 6, 2013 at 2:12 PM

    Hope M!ke Stewart's guarantee is money good. He's aces.

  22. Posted by Ex UBS SA | February 6, 2013 at 3:25 PM

    this company stole my soul and my adolescent ignorance

  23. Posted by E. Spitzer | February 6, 2013 at 4:54 PM

    that's a guy….just sayin'

  24. Posted by Rodskog | February 7, 2013 at 2:24 PM

    I'm clueless

  25. Posted by GIMP | February 8, 2013 at 6:04 AM

    more liabilities on its way. ubs has just entered a doom loop…