Switzerland’s lower house passed a long-mooted bill to ban large banks from paying bonuses to some top managers, a step that reflects popular discontent with the financial sector after the rescue of Credit Suisse Group AG but has uncertain chances of becoming law.
(Bloomberg) — Switzerland’s lower house passed a long-mooted bill to ban large banks from paying bonuses to some top managers, a step that reflects popular discontent with the financial sector after the rescue of Credit Suisse Group AG but has uncertain chances of becoming law.
The proposal from the center-left Social Democrats — entered almost two years ago and well before the recent crisis — was supported by 101 lawmakers, with 70 against, and now goes to the upper house for approval. The bill is not related to the Swiss government’s recent move to cut bonuses for senior managers at Credit Suisse.
The proposal aims to outlaw bonuses paid to the “highest body” of systemically-important lenders, and to persons responsible for operational or strategic management, including leadership of the board of directors, the chief executive officer and the head of risk management.
Amid widespread public disapproval, the lower house of parliament last month voted against the emergency legislation to back the takeover of Credit Suisse by UBS Group AG with 9 billion Swiss francs ($10.1 billion) in direct state guarantees. As a designated committee of lawmakers had already approved the deal, the vote wasn’t enough to derail the biggest bank rescue in Europe since the 2008 financial crisis.
Read More: Over Half of Swiss Disapprove of UBS’s Credit Suisse Takeover
The next opportunity for the upper house of parliament to vote on the bonus would be in its session starting May 30, but it’s unclear whether the proposal will be scheduled then, and the process can also take longer. In the lower-house vote the proposal was supported by the Social Democrats and Greens, but also the center-right Center Alliance. In the upper house, these parties have a slim majority, holding 25 of the total 46 seats.
As a result of the crisis, the government itself has started to mull legal options to limit big bank bonuses, so the bill has been “surpassed by recent events,” Finance Minister Karin Keller-Sutter told lawmakers on Tuesday.
The implicit state guarantee received by large banks means that any risk such institutions take ultimately falls to taxpayers, said Prisca Birrer-Heimo of the Social Democrats, who submitted the proposal in June of 2021.
Aside from Credit Suisse and UBS, other institutions designated by the Swiss National Bank as systemically important are Raiffeisen Group, Zuercher Kantonalbank and PostFinance. That label means that they are already required to hold higher capital and liquidity buffers and maintain recovery and emergency plans.
UBS’s then-CEO Ralph Hamers received a bonus of 9.7 million francs for last year, while the lender paid out bonuses worth $3.3 billion in total.
–With assistance from Myriam Balezou.
(Updates throughout with further details.)
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