The bank announced on Tuesday that its board had decided to “cancel variable remuneration for 2009” in cases where employment contracts give it “a discretionary right” to make such decisions.
“This is a unique decision in the light of the bank’s losses and government efforts, and should not be interpreted as a signal that we have changed our view regarding the basic principles for the bank’s remuneration system,” Swedbank CEO Michael Wolf said in a statement.
“There is still a strong consensus that a system combining fixed and variable remuneration is the most efficient system to create value for customers and shareholders in the long term. However, going forward we will emphasize the long-term component of the total remuneration.”
The move means that the 406 million kronor ($55.5 million) set aside for bonus payments up until the third quarter of 2009 will be returned, bringing Swedbank’s variable compensation payments for the year down to 17 million kronor.
Swedish finance minister Anders Borg has long been critical of what he saw as excessive bonus payments in light of lower profits at banks in the wake of the financial crisis.
Earlier in January he accused banks of ignoring a new set of rules governing bonus payments recently drawn up by the Swedish Financial Supervisory Authority (Finansinspektionen – FI), and threatened to explore even stricter rules if banks didn’t change their behaviour.
“The fact that they (the banks) aren’t hearing these signals which have been very clear is a provocation,” Borg told the TT news agency earlier in January.
Swedbank board chairman Carl Eric Stålberg said the decision came following a number of “complex considerations”.
“At first glance it might seem a simple decision to cancel variable remuneration during a year when the bank is reporting substantial loan loss provisions. But our mission is to protect the shareholders’ investment and to safeguard the bank’s competitiveness, both in the short-term and the long-term perspective”, Stålberg said in a statement.