UBS adopts new exec pay model, axes 2008 bonuses

(Corrects paragraph 15 to say that shareholders will vote on new scheme at next year's AGM, not at Nov. 27 EGM)

By Jason Rhodes and Lisa Jucca

ZURICH (Reuters) - Swiss bank UBS axed bonuses for top executives Monday and said it would introduce a more transparent pay system in the most far-reaching changes on pay at a top European lender during the credit crisis.

UBS, which is struggling in the subprime crisis and whose shares slumped to a new all-time low Monday, said Chairman Peter Kurer, Chief Executive Marcel Rohner and other executive board members would not get any bonuses this year.

Starting from 2009, top managers' bonuses will be blocked for at least three years instead of being paid immediately and executives will receive variable pay if UBS results warrant.

Under the new system, the chairman will only be awarded a fixed salary. Kurer's fixed-pay salary for this year was 2 million Swiss francs ($1.68 million), he said Monday.

"UBS is fully committed to taking its responsibilities seriously and correcting previous errors," the bank said.

Other major European players like Royal Bank of Scotland, Lloyds TSB and HBOS will not pay bonuses after taking British government cash and some top executives at Deutsche Bank have waived their bonus.

But UBS is the first large European lender to introduce a radical overhaul of its executive pay system.

Hefty bonuses for bankers have come under fire in the crisis for encouraging risk-taking rather than a longer-term strategy.

As part of a Swiss government bailout for UBS agreed a month ago, the state demanded a say in future compensation policy after heated criticism in Switzerland that prompted about thousand people to protest outside the bank Saturday.

The Swiss media has targeted in particular UBS' ex-chairman Marcel Ospel, who fostered UBS' risky strategy in the U.S. subprime market and was forced to quit in April. UBS said it was conducting a legal review of whether bonuses awarded to former executives could be clawed back.

HISTORIC LOW

UBS shares were down 4.4 percent at 1412 GMT at 13.86 Swiss francs, slightly outperforming that DJ Stoxx index of European banks, which was down 4.6 percent.

The stock had earlier dropped to a new historic law of 13.51 Swiss francs as pressure mounted over a U.S. tax fraud probe and investors grew increasingly concerned about money outflows.

UBS said last week Raoul Weil, head of wealth management and a board member, would step aside after U.S. authorities charged him with conspiring to help rich Americans avoid paying taxes.