Claws out

20 September 2011 By Margaret Doyle

The Swiss bank’s $2.3 billion trading loss is big enough to wipe out its 2011 bonus pot. But a ’doughnut’ round risks a further staff exodus. Better to share the pain with shareholders, while clawing back pay from senior staff. The amount may be small, but the gesture counts.

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UBS said on Sept. 18 the final bill arising from rogue trading at its investment bank was $2.3 billion, $300 million higher than the Swiss lender had originally estimated.

In 2008, UBS was one of the first investment banks to introduce a new compensation scheme designed to better align staff and shareholder interests in the wake of the bank’s around $50 billion of subprime losses.

Part of the scheme was that the deferred bonuses of very senior and well-paid staff, and those deemed to be risk-takers or controllers, could be clawed back in the event that they damaged the bank’s finances or reputation. The clawback can also kick in if the investment banking division loses money.

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