Skip to main content

UBS reveals new tool to claw back bonuses

By Ramy Inocencio, for CNN
updated 6:31 PM EST, Wed February 6, 2013
STORY HIGHLIGHTS
  • UBS unveils compensation model allowing bank to claw back bonuses more easily
  • Bank will pay out larger portion of bonuses in form of bonds, instead of cash
  • Bond values to be wiped out if bank needs bailout or if equity ratio falls below minimum
  • Change in bonus payout model is shift in politically-charged issue of banker bonuses

(CNN) -- Swiss banking giant UBS is changing the way it pays out bonuses to its 6,000 highest earners to limit the firm's exposure to risk and loss.

The rule change comes as the Zurich-based bank reported a huge fourth quarter loss to shareholders of $2.1 billion. A large portion of that stemmed from a December 2012 agreement to pay $1.5 billion in fines over a scandal to manipulate Libor, the rate banks use when borrowing money from one another.

Under the new compensation model, UBS will dole out a larger portion of annual bonuses in the form of bonds instead of cash. Such instruments would be fully paid out over a number of years and only if there are no major financial issues for the bank, such as the need for a bailout or if its common equity ratio falls below 7%, UBS says.

If such events happen, the value of those bonds would be wiped out, essentially erasing a portion of employee bonuses.

Weber: Political moves could scare market
Record fine for UBS

In a press release, UBS said "the changes focus UBS's employees on medium- and longer-term performance, provide them with the opportunity to benefit from the firms longer term success, and simplify UBS's compensation framework, making it more transparent."

The move signals a shift in the politically-charged issue of bank bonuses. Many financial institutions that received government bailouts during the financial crisis were contractually obligated to continue to pay out bonuses, which raised taxpayer ire.

For bank executives, the change may spur them to make less risky trades or to search for a new job at a firm with less stringent bonus pay rules, analysts say.

ADVERTISEMENT
Part of complete coverage on
updated 5:52 AM EDT, Wed September 3, 2014
Jim Boulden on the future of online shopping.
updated 4:42 AM EDT, Fri August 29, 2014
Recep Tayyip Erdogan is Turkey's new president . So can he revitalize its economic fortunes?
updated 8:44 AM EDT, Thu August 28, 2014
The European Union is stepping in to save its dairy from going sour.
updated 8:36 AM EDT, Mon August 18, 2014
Europe's deteriorating relationship with Russia has hit the region's growth, even before new food sanctions begin to bite.
updated 12:34 PM EDT, Wed July 16, 2014
With cyberattacks on the rise and here to stay, it's a modern-day challenge for people and businesses to get smarter about preventing them.
updated 9:24 AM EDT, Thu August 14, 2014
Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
updated 11:24 AM EDT, Sun July 20, 2014
Evidence points to pro-Russian separatists as perpetrators of the attack and Vladimir Putin is facing uncomfortable questions, David Clark writes.
updated 10:40 AM EDT, Tue August 5, 2014
The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
updated 5:02 AM EDT, Thu July 3, 2014
Macau has overtaken Switzerland in the wealth stakes, being named the world's fourth richest territory by the World Bank.
updated 10:47 AM EDT, Fri July 18, 2014
Saudi Arabian Bateel brand is best known for its delectable dates but it now has more than a dozen cafes and a new bakery in the works.
updated 7:00 AM EDT, Thu July 17, 2014
A British nanotech company has created what it says is the world's darkest material. It is so dark the human eye can't discern its shape and form.
updated 12:02 PM EDT, Wed July 16, 2014
Jibo robot is designed to be an organizer, educator and assist family members. CNN's Maggie Lake met him and says she was impressed with his skills.
updated 5:09 PM EDT, Fri July 18, 2014
American burger joints have sprung up all over London, but how to know which ones are best? CNN's Jim Boulden investigates.
updated 8:22 AM EDT, Wed June 18, 2014
Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
updated 11:02 AM EDT, Wed June 18, 2014
At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
updated 6:58 AM EDT, Wed July 16, 2014
Bob Mazzer has photographed inside London's Tube network for 40 years. He's captured history.
updated 1:12 PM EDT, Fri July 18, 2014
Exotic animals are becoming a profitable business opportunity for Nicaraguan entrepreneurs. CNN's Rafael Romo reports.
updated 11:29 AM EDT, Fri June 13, 2014
Iraq produces 3.3 million barrels per day and has the world's fourth-largest oil reserves. But the current crisis is putting all this in danger.
updated 8:22 AM EDT, Wed June 18, 2014
Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
updated 9:14 AM EDT, Mon June 16, 2014
The gas standoff between Russia and Ukraine could have a knock-on effect on Europe. Explore this map to find out why is the EU nervous.
updated 6:58 AM EDT, Wed July 16, 2014
Bob Mazzer has photographed inside London's Tube network for 40 years. He's captured history.
updated 8:06 AM EDT, Tue June 17, 2014
The UK capital promotes its tech stars and shows it can compete with Silicon Valley. Here are five companies that pitch to make it big.
ADVERTISEMENT