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Last updated at 12:38 GMT, Friday, 26 February 2010

'Junk' bonuses now worth billions

Summary

26 February 2010

Bonuses, thought to be worthless and given to Credit Suisse bankers as punishment for their poor work, have now become much more valuable than many other 'safer' investments.

Reporter:
Alex Ritson

Head office, Credit Suisse, Zurich

Credit Suisse Bank, Head office in Zurich

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Report

The five billion dollar pool of so-called 'Toxic Debt' was originally described as a way of forcing Credit Suisse investment bankers to "eat their own cooking".

The bank lost seven billion dollars last year, in large part because of the investment decisions of some of its best paid staff. They'd put money into complicated financial products linked to risky commercial debt secured, on among other things, a Japanese shopping centre, an American supermarket chain and other commercial property that had plunged in value.

At the height of the financial crisis, many people thought these investments were worthless. To Credit Suisse, it seemed right to share them out as annual bonuses among the people who had apparently got things so wrong. But as confidence has returned to the market, it's become clear that the toxic asset pool wasn't nearly as toxic as had been thought.

The toxic bonus fund has soared in value by 72 percent. That compares with a 60 percent increase in the value of Credit Suisse shares over the same period, or a mere 19 percent rise in America's Dow Jones index.

The bankers may well feel they've earned their money though. Credit Suisse is safely back in profit and unlike its rivals at UBS, Credit Suisse didn't take a bail out from the Swiss Government.

Alex Ritson, Business Reporter, BBC News

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Vocabulary

toxic debt

loans bought from other financial institutions which failed to make money because people and organisatios were unable to pay them back; such loans are thought of as poisonous

financial products

services that financial companies offer to help them make money, such as bank loans, mortgages and insurance policies

risky

dangerous, likely to fail, may cause loss or harm

secured

guaranteed

supermarket chain

group of supermarkets in different areas which all have the same name and are owned by the same company

plunged in value

was suddenly worth a lot less money than before

asset pool

collection of investments which the owners believe will go up in value rather go down

has soared

has suddenly increased or gone up

its rivals

its competitors in business

a bail out

money that has been given to an institution or a person to save them from going out of business

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