The Swiss government has ordered Credit Suisse to temporarily suspend bonuses for its employees following a plan for the bank to be taken over by rival UBS. The move comes as authorities in Switzerland rushed to finalize a $3.25 billion sale of Credit Suisse to UBS after an outflow of deposits and years of trouble raised fears of a potential international financial crisis.
Under federal law, the government is authorized to set remuneration-related measures in cases involving Switzerland’s biggest banks. The Swiss Department of Finance announced on Tuesday that it was ordering Credit Suisse to suspend bonuses for its employees as part of these measures.
However, the government has clarified that it will not block bonus payments from last year that have already been granted and are set to be immediately paid out. It does not want to penalize Credit Suisse employees who did not cause the crisis.
Despite this, the authorities in the Swiss capital, Bern, have stated that they will prohibit payouts of deferred bonuses, except for those that are already in the process of being paid out. This means that some employees may still receive bonuses, but only if the payments are already underway.
The move is part of broader efforts by the Swiss government to stabilize the country’s banking sector and prevent further crises from occurring. The collapse of two US banks in the past has highlighted the potential for financial crises to quickly spread across borders, causing economic havoc.
The takeover plan orchestrated by Credit Suisse and UBS is seen as a way to mitigate these risks by creating a stronger, more stable bank. However, the suspension of bonuses for Credit Suisse employees shows that there are still concerns about the bank’s financial health and the potential risks it poses to the wider economy.
Swiss government’s decision to order Credit Suisse to suspend bonuses for its employees highlights the ongoing challenges faced by the country’s banking sector. While the takeover plan with UBS may help to address some of these challenges, it is clear that further action is needed to ensure the long-term stability of the Swiss financial system