UBS's Clawback Partly Down to Cruel Accounting Whim

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Collectively, senior bankers at UBS are CHF300bn ($282 million) worse off than they might have been if the bank had made a net profit for 2009.

Bloomberg reports that Oswald Gruebel dispatched a memo yesterday saying that the bank's net loss for 2009 will trigger UBS's bonus clawback mechanism for the first time ever.

In 2008 Bloomberg says UBS deferred CHF900 million of bonuses to be paid in equal parts in 2010, 2011 and 2012 if the bank made a net profit. Given that UBS made a net loss of CHF2.7 billion overall for 2009, this year's CHF300 million sadly won't be paid.

However, it's worth bearing in mind that CHF2 billion of that loss comes from an accounting issue: as its performance improved, UBS - like most other banks - had to register a theoretical cost for buying back its own debt.

A further CHF1.6 billion of losses in the investment bank for 2009 were attributed to credit losses on "reclassified financial instruments." This also sounds slightly unfair, particularly as the bank would have made a net profit in the absence of these two items. However, analysts point out that if the losses hadn't shown up on "reclassified financial instruments," they would have appeared anyway on the trading book.

"To be brutally honest, all banks are getting bonuses down," says Peter Thorne, an analyst at Helvea in London. "They need to prepare their people for the days when margins are reduced for good."

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