UBS is looking at capping bankers’ bonuses as the Swiss bank joins its European peers in cracking down on remuneration schemes following regulatory and investor pressure.
Switzerland’s largest bank by assets is considering a range of options including putting a lid on executives’ bonuses either in relation to fixed salary or the bank’s net profit, increasing the time for deferred pay to five years and aligning its absolute remuneration level with the average of a peer group.
Axel Weber, the former Bundesbank president who joined as chairman four months ago, has been jetting around Europe and the US getting investor feedback about UBS’s pay policies, according to attendants of those meetings.
The ideas for wide-ranging reforms will be debated at board level in the next few months and a final plan will be presented to key investors several months ahead of the annual meeting next May, people familiar with the discussions said.
A scheme to cap bonuses could copy that of UK banks Barclays and HSBC, where executive directors’ annual variable pay is limited to 250 per cent and 300 per cent of base salary respectively.
As another option, UBS is looking at emulating Credit Suisse’s system of restricting the bonus pool of top managers to a specified amount of net profit. Its main Swiss rival introduced a target last year to keep executive board’s variable pay below 2.5 per cent of net profit, according to its latest annual report.
A new pay system would also be designed to make UBS’s performance criteria and benchmarks more transparent to investors.
Deutsche Bank this week said it would pay its top 150 managers their deferred share bonuses only after five years– instead of the common practice of staggering it over three years – and is setting up an independent panel to review pay practices.
UBS’s board received a warning shot at its last annual meeting in May when only 60 per cent of the capital represented approved its pay system. Investors criticised a lack of disclosure and too high a proportion of variable pay.
Mr Weber said at the annual meeting that the votes demonstrated the need for better communication with shareholders.
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