Rumors Abound on UBS Bonuses

Rumors are flying thick and fast about the likely structure of bonuses at UBS this year.

UBS has already indicated it will be paying a higher proportion of bonuses in stock after reporting its first quarterly loss in half a decade and predicting a full year loss for its securities unit.

More color is emerging on what this 'higher proportion of stock' might look like. According to one headhunter, the bank has indicated that it will pay 75 percent of bonuses above $500,000 in stock and 100 percent of anything above $2 million in stock. She says UBS is compensating for this by offering recipients a shorter vesting schedule.

Both claims are unconfirmed by UBS itself.

Even Worse: Deferred Cash?

Another rumor is that UBS plans to defer paying part of the remaining cash element of its bonuses until 2008. UBS has categorically denied this, but one headhunter says it would make sense - both for UBS and other banks.

"It is very possible that those banks hardest hit by credit losses will find it necessary to pay greater proportions of bonus awards in stock this year, and probably even defer the cash elements of the bonus over the next 12 months," he says.

It won't be the first time banks have withheld cash payouts. ABN operates (or operated before it jumped into bed with RBS and some Spaniards) a deferred cash approach. In 2006, Dresdner Kleinwort famously deferred a proportion of its traders' cash bonuses on the condition they meet additional performance targets. Several traders left as a result.

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