UBS Deferred Bonuses, Barclays Lawsuit, Davos: Compliance

UBS Group AG, which escaped trading losses in the turmoil following the end of the Swiss franc cap, announced a $2.9 billion plan to reward bankers with securities that can be wiped out if the lender racks up losses in the next five years.

UBS said on Friday that it would pay about 500 million Swiss francs ($572 million) a year in deferred contingent capital, starting with compensation for 2014. The 2.5 billion francs in deferred compensation will boost its additional Tier 1 capital, a measure of financial strength, it said.

Switzerland’s biggest bank also said its trading businesses didn’t suffer an overall loss in the havoc that erupted when the Swiss central bank unexpectedly scrapped its franc cap, sending the currency up as much as 41 percent against the euro.

UBS, along with Credit Suisse Group AG, the second-biggest Swiss bank, is using contingent capital bonds for bonuses to strengthen its defenses and limit incentives to take excessive risks. The securities can be wiped out if the banks’ capital ratio falls below a predefined threshold.

UBS, which had to take a government bailout at the height of the financial crisis, introduced deferred capital compensation for 2012.

In 2013, the plan accounted for 30 percent of bonuses for executive board members and 40 percent of deferred bonuses for employees earning more than $300,000. About 5,300 employees received contingent capital awards for 2013, the bank said in its annual report.

The bank hasn’t produced a breakdown for 2014. It may provide more details when it reports fourth-quarter earnings on Feb. 10, said Anita Greil, a spokeswoman.

Courts

High-Frequency Probe’s First Target Isn’t Traders But Barclays

Almost a year after New York’s top cop made a splash with subpoenas of six high-frequency trading operations, the investigation has so far led to one big target: Barclays Plc.

While the names of some of the subpoenaed firms cropped up in documents filed last week in the state court in Manhattan, the firms aren’t defendants. They are listed as part of New York Attorney General Eric Schneiderman’s proposed updated complaint against Barclays, which ran the private trading venue, or dark pool, where these firms traded.

His office announced its probe in March.

Schneiderman’s suit doesn’t allege any wrongdoing by the high-frequency trading firms. Its focus, instead, is whether Barclays lied to its customers about what HFT firms were doing inside Barclays’s dark pool, one of Wall Street’s largest in-house trading platforms.

Schneiderman, a Democrat, sought permission Jan. 21 to file an amended suit against Barclays. The bank -- not the HFT firms -- was accused of wrongdoing.

“The amended complaint merely repackages the same flawed arguments that were in the original complaint,” Mark Lane, a Barclays spokesman, said in an e-mail. “While we continue to seek to cooperate with the New York attorney general in this matter, we will continue to defend vigorously against these allegations.” Barclays filed a motion to dismiss the case.

The case is New York v. Barclays Capital Inc., 451391/2014, New York State Supreme Court, New York County (Manhattan).

Somerfield, Gallaher Group Lose Suit Over U.K. Antitrust Fines

Somerfield Stores Ltd. and Gallaher Group Ltd. weren’t unfairly treated during the U.K. competition regulator’s probe into cigarette price fixing between manufacturers and retailers, a London judge ruled today.

Somerfield and Gallaher Group signed early settlement agreements with the Office of Fair Trading as it was then called, in 2008 in exchange for smaller fines.

Other companies, including Imperial Tobacco, successfully appealed the fines and the regulator’s case was set aside by the Competition Appeals Tribunal.

Somerfield and Gallaher Group argued their fines should be paid back despite their not having appealed in time.

The companies “were well aware of what was alleged and what they had done,” Judge Andrew Collins said in his ruling Monday.

Gallaher Group paid a fine of “a little over” 50 million pounds ($75 million) and Somerfield just under 4 million pounds, the judge said.

Interviews/Commentary

Bob Diamond Sees ‘Terrific’ Opportunities to Buy Banks

Atlas Merchant Capital LLC Chief Executive Officer Bob Diamond said there’s room to acquire banks, not just in Africa, but also in Europe, as regulatory changes create opportunities.

He spoke on Bloomberg Television’s “Countdown” with Francine Lacqua and Guy Johnson at the World Economic Forum’s annual meeting in Davos, Switzerland.

For the video, click here, and for more, click here.

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