UPDATE 3-Credit Suisse execs get bonus in risky assets

(Recasts lead, adds details on portfolio)

By Emma Thomasson and Dan Wilchins

ZURICH/NEW YORK, Dec 18 (Reuters) - Credit Suisse Group AG(CSGN.VX) will pay senior executive bonuses with troublesome, illiquid assets, forcing employees to take on the risk that at least some of them put on the Swiss bank's books.

The new plan will cut the bank's risk exposure by linking most of its top executives' bonus payouts to some $5 billion in illiquid and often opaque assets, which have tumbled in value amid the credit crisis.

The plan comes amid fierce criticism that bonus systems were rewarding bankers for taking on irresponsible risks.

"While the solution we have come up with may not be ideal for everyone, we believe it strikes the appropriate balance among the interests of our employees, shareholders and regulators and helps position us well for 2009," a memo from CEO Brady Dougan and investment bank boss Paul Calello said.

Credit Suisse appears to be the first to use tarnished assets to pay employees, linking their rewards to the performance of risky assets. Selling the assets in the open market would further depress their value and giving them to employees allows executives to benefit if the assets perform better than current market prices would imply.

The bank is considering allowing outside investors to invest in the pool, a person familiar with the matter said.

The memo, seen by Reuters, said investment bank managing directors and directors will receive 70 percent to 80 percent of their deferred equity compensation in so-called partner asset facility (PAF) units that "will be linked to the performance of a pool of illiquid assets." The rest of their bonus will be in cash that must be returned under some circumstances.