UBS, the Swiss bank that recently announced heavy first-quarter losses, has defended its decision to increase base salaries for some investment bankers.

Oswald Grübel, the chief executive, argued in a leaked memo that UBS had to pay its employees in line with the market and that it would “stick to this stance, even if it is criticised in the emotional debate over salaries”.

Mr Grübel, who sent the memo to staff on Tuesday, said that the salary increases were “necessary to safeguard our profitable business areas and to secure their success”.

The bank decided to raise some base salaries after being forced to limit bonuses by the Swiss banking regulator in an effort to stop profit-generating senior investment bankers from defecting.

A UBS spokesman said yesterday that salaries had been increased at the investment bank, but would not confirm how large rises were. There is speculation that some salaries have been increased by as much as 50 per cent.

The news follows the recent quarterly announcement from UBS, which confirmed that the bank had made a loss of £1.16 billion in the first three months of this year.

UBS has been hit heavily by the recent credit crisis and last year announced the largest losses in Swiss corporate history and subsequently received government aid.

The business has also come under fire from the Internal Revenue Service in the United States, which has taken legal action in a bid to force UBS to release details of 52,000 Americans with offshore accounts.

Since joining UBS as chief executive in February, Mr Grubel has already announced 7,500 job cuts and replaced Jerker Johansson, its head of investment banking.

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