UBS will stick to a policy of paying market wages after being criticized for raising salaries at its investment bank, chief executive Oswald Gruebel told employees, according to Bloomberg, quoting from an internal staff memo.

“We have to pay our employees in line with the market,” Mr Gruebel said in an internal memo to staff yesterday. “We will stick to this stance, even if it is criticized in the emotional debate over salaries.”

Mr Gruebel did not say whether his remarks applied to all departments of the banking and wealth management group, or only to certain segments of the Zurich-listed firm that has seen a number of defections to rivals in recent days. As reported yesterday, the head and deputy head of financial planning at the wealth management arm of the bank in London have left to join Credit Suisse.

UBS is boosting salaries for senior bankers at its investment bank by an average of 50 per cent to stem defections, three people with knowledge of the matter said earlier this month, Bloomberg reported. The bank cut its bonus pool by 78 per cent in January after amassing the biggest loss in Swiss corporate history in 2008 and turning to the government for help.

The “exceptional” salary increases “were necessary to safeguard our profitable business areas and to secure their success,” Mr Gruebel said. “Following significant cuts in variable compensation, we had fallen well behind the market in certain areas, and that is unsustainable in the long run.”

To help retain senior bankers, UBS had also set aside about SFr900 million ($831 million) for bonus payments over the next three years under a plan to tie compensation to longer-term profitability. The payments depend on both the bank and the employee’s division being profitable, and on UBS accepting no further capital from the state, the company said in February.