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

efinancialcareers.com:

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