The compensatory element in the Credit Suisse bonus situation?

As you will know, it has not been a very great year for bonuses at Credit Suisse. Deferrals are nasty and the bank is thought to be preparing for lots of exits.

However, it is not that bad. We understand that senior Credit Suisse bankers are counting on benefiting from a bonus plan initiated several years ago.

The Partner Asset Facility

The scheme in question is the Partner Asset Facility (PAF), launched to much fanfare in late 2008.

At the time, it was reported that the directors and managing directors participating in the facility wouldn't receive a payout for at least five years, making the first payment due in 2014.

In its recent fourth quarter report, Credit Suisse said that although the contractual term of the PAF is 8 years, 66.7% of the PAF awards were fully vested on grant and a further 33.3% vested over the first three months of 2009. However, cash payments are not currently thought to be available.

At the time they were given, the PAF awards were worth CHF686m.

It's likely they're now worth a lot more. The PAF comprised so-called 'toxic assets' such as commercial mortgage backed securities and leveraged loans, which have recovered some of their value recently.

In its fourth quarter report, Credit Suisse said it had exited a 'substantial portion of its CMBS portfolio,' suggesting pricing had improved. Yesterday, analysts at Evolution issued a buy rating on UBS, citing firmer legacy asset prices, 'particularly in CMBS.' As CMBS assets rise in price, the PAF is likely to have benefited.

The assets in the PAF were alleged to be generously underpriced at the time. By August 2009, they were said to have risen 17%.

"Senior Credit Suisse people are saying that the PAF facility has helped adjust for the downside in this year's bonus pool," claims one headhunter. "It's become a very valued asset."