Skip to main content

UBS reveals new tool to claw back bonuses

By Ramy Inocencio, for CNN
February 6, 2013 -- Updated 2331 GMT (0731 HKT)
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
August 18, 2014 -- Updated 1236 GMT (2036 HKT)
Europe's deteriorating relationship with Russia has hit the region's growth, even before new food sanctions begin to bite.
July 16, 2014 -- Updated 1634 GMT (0034 HKT)
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.
August 14, 2014 -- Updated 1324 GMT (2124 HKT)
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?
July 20, 2014 -- Updated 1524 GMT (2324 HKT)
Evidence points to pro-Russian separatists as perpetrators of the attack and Vladimir Putin is facing uncomfortable questions, David Clark writes.
August 5, 2014 -- Updated 1440 GMT (2240 HKT)
The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
July 3, 2014 -- Updated 0902 GMT (1702 HKT)
Macau has overtaken Switzerland in the wealth stakes, being named the world's fourth richest territory by the World Bank.
July 18, 2014 -- Updated 1447 GMT (2247 HKT)
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.
July 17, 2014 -- Updated 1100 GMT (1900 HKT)
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.
July 16, 2014 -- Updated 1602 GMT (0002 HKT)
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.
July 18, 2014 -- Updated 2109 GMT (0509 HKT)
American burger joints have sprung up all over London, but how to know which ones are best? CNN's Jim Boulden investigates.
June 18, 2014 -- Updated 1222 GMT (2022 HKT)
Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
June 18, 2014 -- Updated 1502 GMT (2302 HKT)
At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
July 16, 2014 -- Updated 1058 GMT (1858 HKT)
Bob Mazzer has photographed inside London's Tube network for 40 years. He's captured history.
July 18, 2014 -- Updated 1712 GMT (0112 HKT)
Exotic animals are becoming a profitable business opportunity for Nicaraguan entrepreneurs. CNN's Rafael Romo reports.
June 13, 2014 -- Updated 1529 GMT (2329 HKT)
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.
June 18, 2014 -- Updated 1222 GMT (2022 HKT)
Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
June 16, 2014 -- Updated 1314 GMT (2114 HKT)
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.
July 16, 2014 -- Updated 1058 GMT (1858 HKT)
Bob Mazzer has photographed inside London's Tube network for 40 years. He's captured history.
June 17, 2014 -- Updated 1206 GMT (2006 HKT)
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