Credit Suisse chair António Horta-Osório has vowed to overhaul the bank’s pay policy after a succession of crises enraged investors and sent its share price tumbling.
The bank will present a new pay policy at its annual general meeting in April, with the aim of engineering a cultural shift that makes employees more accountable for decisions taken on managing risk.
Speaking at the FT’s Global Banking Summit on Thursday, Horta-Osório said the new pay structure would include incentives based on risk management metrics and take “into account the cost of capital, aligning managers throughout the bank with shareholders more”.
The Portuguese-British banker also said he backed the greater use of longer-term incentives, especially for senior managers, as well as clawbacks of vested and unvested bonuses to improve accountability.
“Those are more important than whether in absolute terms the remuneration is too high or too low,” he said. “Remuneration has to be in line with the sector and has to be aligned with the interests of shareholders, with value creation after deduction of the cost of capital.”
The pledge from Credit Suisse’s new chair comes as the bank battles to repair the damage from the collapse of specialist finance firm Greensill Capital in early March, which trapped $10bn of the Swiss bank’s client funds. Just weeks later, the bank suffered a $5.5bn trading loss — the biggest in its 165-year history — following the implosion of the family office Archegos Capital.
Joining Credit Suisse soon after, Horta-Osório promised a revamp of the group. But his new strategy for the bank, which was revealed last month alongside chief executive Thomas Gottstein, underwhelmed investors, with shares falling 5 per cent following the presentation.
The bank’s stock is down more than 30 per cent since the collapse of Greensill, leaving its market capitalisation at $23.4bn — less than half that of fierce rival UBS.
A damning report by law firm Paul Weiss into the collapse of Archegos found that the trading losses were a result of a “fundamental failure of management and controls” in Credit Suisse’s investment bank and a “lackadaisical attitude towards risk”.
In response, the lender reclaimed $70m in pay and bonuses from up to 23 individuals who were found to be most at fault, including nine members of staff who were fired.
However, as Credit Suisse reeled from the twin crises, it also had to offer retention bonuses to senior executives and team leaders over the summer to head off an exodus from the investment bank.
Meanwhile, a report into Credit Suisse’s failings over Greensill by Swiss law firm Walder Wyss and Deloitte has been hit by a series of delays and is unlikely to be finalised before the bank’s full-year results in February, according to people familiar with the matter.
The board has yet to decide whether it will release the full report, which is expected to highlight several of the risk management and cultural shortcomings identified by the Archegos investigation, or publish a summary of its findings.
According to people familiar with the matter, one of the investigation’s main findings so far is that Credit Suisse staff failed to pay enough attention to what the Greensill funds invested in and were too trusting of the supply chain finance firm.
The bank has so far recovered just over 70 per cent of the $10bn invested in the funds. Recovering the rest is expected to take years.
In October, Credit Suisse offered those investors trapped in the funds refunds on fees from brokerage, discretionary mandate and banking services, as well as investment advice. Just under half of the 1,000 investors have so far signed up to the programme, known internally as Project Sunflower, according to people familiar with the matter.