A package of more than £1 billion in bonuses for staff at UBS, the Swiss bank, is expected next month and threatens to reignite the debate over the ethics of exceptional rewards for bankers during the present worldwide banking crisis.

UBS is to pay out around SFr2 billion (£1.3 billion) in bonuses next month, despite heading for a SFr8 billion fourth-quarter loss, the biggest quarterly deficit ever sustained by a Swiss company.

The bonus payments were agreed last week by Finma, the new Swiss financial regulator, whose consent UBS is obliged to seek after it was bailed out by the Swiss Government last autumn.

Although Marcel Rohner, the chief executive, and Peter Kurer, chairman, have agreed to forgo their bonuses for 2008, the bank's 77,000 employees will receive performance-related payments in next month's wage packet.

A spokesman for Finma would not be drawn on the precise amount of the bonus payment, which will be disclosed in UBS's fourth-quarter results on February 10. However, he said: “It's correct that we have given the green light to the 2008 bonus. The decision was taken this week”.

Finma is still holding meetings with UBS to reach agreement on the bank's future bonus arrangements.

Last November, UBS set out proposals for paying out minimal cash bonuses from 2009, which were heralded as a template for investment banking remuneration in the wake of the credit crunch.

Two thirds of all cash bonuses would be held in escrow accounts for at least a year after payment, and share-based bonuses would not vest for at least three years.

Notice periods for executives will be reduced from 12 to six months and pay-offs calculated against base salary and cash bonus alone, rather than taking any equity incentives into account.

UBS paid out SFr10billion in bonuses last year as part of a total staff costs of SFr24.7 billion.

UBS has so far written down $49 billion (£36 billion) as a result of the credit crunch, has transferred $60 billion in toxic assets to a fund run by the Swiss National Bank and last October received a SFr6 billion injection of fresh equity from the Swiss Government in return for a 9.3 per cent stake.

It has cut 9,000 jobs since the onset of the credit crunch, but is expected to announce further staff reductions alongside next month's figures.

Hans-Rudolf Merz, the Swiss President and Finance Minister, has called for fundamental revisions to bank compensation, stating that the basic idea of the bonus had been “partially perverted”.

The Swiss National Bank is expected to report a SFr3.9 billion fourth-quarter loss in March, largely as a result of taking UBS assets on to its balance sheet.

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