VTB Capital to pay some bonuses in VTB shares
MOSCOW. Feb 9 (Interfax) - VTB Capital is introducing a new system for bonuses, and will pay some of the 2011 bonuses in shares and Global Depositary Receipts (GDR) for shares in the parent bank VTB .
VTB Capital used to pay bonuses in cash only, some immediately and some over a three-year period.
"Now we've changed that, and we'll pay the deferred part in shares rather than cash. Employees will have an asset that they will receive in equal installments over three years," Herbert Moos, deputy CEO of VTB, told Interfax.
"Bonuses for all VTB Capital employees for 2011 will be paid in the new form [partly in shares]. The bank proposes to buy some of the shares and GDR for the new bonus program on the market," Moos said.
VTB shares will go to investment block managers working in Russia and GDR to employees working in offices abroad, he explained.
Options are not an additional element of bonuses but a replacement of the existing mechanism, he said.
The new system will be used for all VTB Capital employees (around 1,000 employees) in London, Moscow, Dubai, New York, Singapore and Hong Kong.
Managers will obtain VTB shares at market price at the time the option is implemented, Moos said.
Obtaining bonuses in the years after the reporting years will depend on several conditions. For example the employee must continue working with the VTB Group and not be on any disciplinary procedure. In addition, if any losses are made from the actions of the employee over three years or a provision on loans the employee has allocated or on assets they have traded has to be created, they will not receive the remaining part of the bonus.
Moos did not say what the ratio of money and shares would be in the bonus system, but he did say the option share would be higher for management personnel.
"The task is to ensure managers that have a direct impact on the group's fate receive more shares [in the overall compensation structure," he said.
The new system is in many ways a response to the demands of the British Financial Services Authority (FSA), he said. "We are the only Russian bank in Britain with a full license and that adheres to all FSA requirements," Moos said.
This program complies with the G20 recommendations on bonus payments for bankers.
"We are the first Russian bank that will pay bonuses with live [not phantom] shares. In several companies although the bonus amount is determined in shares it is always paid in cash," he said.
The VTB Capital program may later be extended to the entire VTB Group if it obtains approval from the regulators.
Paying bonuses in shares and buying back shares from minority shareholders that took part in the people's IPO are not related to each other, he said. "The instruments are different: for example, we will buy more GDR than shares. It is clear that the amounts for share numbers and their prices will not match and there is also a difference in the launch times of these two directions," Moos said.
Both Sberbank and VTB have been preparing option programs in the last few years. They could not gain approval from the government for a long time, but at the beginning of 2011 First Deputy Central Bank Chairman Alexei Ulyukaev said there were no obstructions to the VTB and Sberbank option programs and that they could be implemented in 2011. However, the programs were not implemented.