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UBS To Overhaul Executive Pay - Report

Tom Burroughes, Editor , London, 28 October 2009


UBS intends to reform its pay structure by raising fixed salaries and matching bonuses to sustainable performance, but the Swiss banking and wealth management group will not carry out the changes until its key units are profitable, according to Reuters, citing an internal memo.

The Swiss bank had already overhauled its compensation system at the end of 2008 after the Swiss government rescued it from the sub-prime crisis with a cash injection.

The bank declined to comment when contacted by WealthBriefing on the matter.

Banks are under pressure from policymakers to align executive compensation more closely to the long-term interests of clients and bank shareholders, to prevent short-term risk-taking that has been blamed for helping fuel the recent financial crisis.

The internal memo released to UBS staff on 5 October showed the bank now plans to go further to meet regulatory demands in Switzerland and internationally, the news service said.

"At UBS, the ratio of variable to fixed compensation was in some cases particularly high," the report quoted the memo as saying.

"Fixed salaries at UBS should, in the future, be high enough that the variable portion can be adjusted from year to year, while still ensuring that the total compensation is in line with market standards,” it said.

Credit Suisse, meanwhile, announced a review of its compensation structure a week ago, so that it becomes the first large global bank to meet standards as laid down by the Group of 20 major industrialised nations.

UBS said bonuses would in future be based on the profitability of each division after deducting capital costs. Other indicators, such as revenue quality and the market position of the division, will also be taken into account.

"We can only fully implement this system, however, when our most important businesses return to profitability," UBS said. "For compensation decisions for the transition year 2009, our general approach is to offer market-competitive compensation in all divisions."

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