All of you probably remember last year how Credit Suisse did something “unthinkable” by giving bonuses in the form of CDOs and ABS. Now it seems that CS bankers were some of the most highly compensated during the recession!
Bankers’ ‘junk’ bonuses turn into $5bn
By Alex Ritson
Business reporter, BBC World Service
Bonuses made up of so-called toxic debt and given to bankers at Credit Suisse as a punishment for poor investments, have soared in value.
Their bonus pool, made up financial products originally thought to be worthless, is now worth $5bn (£3.2bn).
The bank lost $7bn last year, in part due to the investment decisions of some of its best-paid staff.
The toxic debt bonuses had been described as a way of giving the bankers to taste of their own medicine.
But it has now emerged the value of the toxic bonus pool has climbed by 72% – far outperforming many safer investments.
The money had been put into complicated financial products linked to the risky commercial debt secured on among other things, a Japanese shopping centre, an American supermarket chain and other commercial property that had plunged in value.
At the height of the financial crisis, many people thought these investments were worthless. To Credit Suisse, it seemed right to share them out as annual bonuses among the people who had apparently got things so wrong.
But as confidence has returned to the market – it has become clear that the toxic asset pool wasn’t nearly as toxic it had been thought.
The toxic bonus fund has soared in value by 72%. That compares with a 60% rise in the value of Credit Suisse shares over the same period – or a mere 19% rise in the main US share index the Dow Jones.
The bankers may well feel they have earned the money though.
Credit Suisse is safely back in profit – and unlike its rivals at UBS, Credit Suisse did not take a bail-out from the Swiss Government.
~Sourced by I.S.