ZURICH, SWITZERLAND - THE biggest Swiss bank, UBS, which recently received a $60 billion (S$89.9 billion) state rescue package, is going ahead with staff bonus payments, an official financial watchdog said on Monday.

A spokesman for the Swiss financial markets surveillance authority (Finma) said that it had to ensure major cuts in the bank's bonus payments for 2008 before it allowed them to go through.

He said Finma 'gave its agreement last week' to the bonuses paid to the whole of the bank's staff.

'We had intensive discussions and carried out a massive and substantial reduction,' in the bonuses, the spokesman added.

Some Swiss media reported on Sunday that the payments totalled two billion Swiss francs instead of the intially planned three billion.

The Finma spokesman declined to give the exact amount, saying that it would be revealed by the bank when its annual results were released on February 10.

UBS was one of the banks hit the hardest by the United States subprime home-loan crisis and is widely expected to report the biggest loss in Swiss corporate history, about 20 billion Swiss francs, for 2008, the newspaper Sonntagszeitung reported recently.

Last November, UBS posted a net profit of 296 million Swiss francs for the third quarter following a year of losses, but warned that a renewed loss was looming for the following quarter.

UBS was forced to seek a $60 billion state aid package last year and lost dozens of billions of francs in deposits as unsettled customers withdrew accounts from the troubled bank.