Credit Suisse Board Endorses CEO, Confident on Capital
June 22 2012 - 1:39PM
Dow Jones News
In an unusual move, the board of Credit Suisse Group AG
(CSGN.VX) Friday issued a statement to back Chief Executive Brady
Dougan, saying it is confident management's plans to bolster
capital will ensure Switzerland's No. 2 meets and exceeds
regulatory requirements.
Mr. Dougan's problems have been building in recent days. Last
week, he was caught up in an unusual public spat with Switzerland's
central bank over whether Credit Suisse's capital cushion is robust
enough. Meanwhile, the Swiss bank's stock is in the dumps and some
of its bankers are grumbling about Mr. Dougan's performance as
chief executive.
The questions about Mr. Dougan have intensified in recent days
and represent an unwelcome distraction for the bank, which has
prided itself on avoiding much of the turmoil that has befallen its
larger rival, UBS AG (UBS).
The board has now moved to quell any speculation about Mr.
Dougan's future at the bank, saying it was comfortable with the
progress that has been made toward meeting the Basel III capital
requirements.
The spat with the central bank stems from the fact that some of
Credit Suisse's capital is still held in the form of bonds, which
will turn into equity later. The bank more than meets current
requirements, but under the strict Basel III rules, which will come
into force in 2019, this capital doesn't count. The central bank's
criticism centered on that fact, as it said if the euro-zone crisis
turns markedly worse, such equity capital is lacking.
Moody's Investors Service's long-anticipated downgrade of more
than a dozen global banks, including Credit Suisse and UBS, to some
extent supports Credit Suisse's claim that its capital is adequate.
Only two banks--Royal Bank of Canada (RY) and HSBC Holdings PLC
(HSBA.LN)--are rated higher.
"We are pleased that Moody's continues to recognize Credit
Suisse as one of the most highly rated banks in its peer group,
citing our balanced business portfolio, strong liquidity position,
improving capital position as well as our low exposure to the
peripheral European economies," said Chief Financial Officer David
Mathers in a statement.
Credit Suisse had its deposit and senior debt ratings rating cut
three notches to A1 with a stable outlook from Aa1 in Moody's
review of 17 banks with global capital markets operations.
Credit Suisse shares ended 0.6% lower Friday at 17.95 Swiss
francs. The shares have lost around a fifth of their value this
year, compared with a small increase in the price of rival UBS's
stock. Compared with their most recent peak in late 2009, Credit
Suisse shares have lost more than 70% of their value.
That has eroded the internal standing of the once-popular Mr.
Dougan and drawn criticism from investors.
But Mr. Dougan has plenty of defenders. He helped Credit Suisse
navigate the financial crisis and substantially strengthened the
bank's capital buffers. More recently, Mr. Dougan has won plaudits
for an aggressive two-year, 2-billion-Swiss-franc ($2.09 billion)
cost-cutting campaign that the bank says is exceeding targets.
Another factor working in his favor: the bank lacks obvious
candidates to succeed him.
Write to Anita Greil at anita.greil@dowjones.com
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