Bloomberg News

Credit Suisse Board Backs CEO in Feud With Swiss Central Bank

June 22, 2012

Credit Suisse Group AG (CSGN)’s board threw its support behind Chief Executive Officer Brady Dougan a week after the Swiss National Bank said the company needs to accelerate efforts to raise capital.

“The board is comfortable with the progress that has been made toward meeting the Basel 3 capital requirements,” the directors said in a statement today, adding that they’re “confident” that management’s plans will ensure the Zurich- based bank exceeds capital requirements.

Credit Suisse, the second-biggest Swiss bank by assets, fell as much as 11 percent on June 14, hitting the lowest level since 1992, when the Swiss central bank surprised the company by urging it to boost capital “during the current year.” Dougan, a 52-year-old U.S. citizen who’s been CEO since May 2007, has contended he doesn’t plan to sell stock to raise capital.

“They’re going into battle with the Swiss National Bank because they feel unfairly treated,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “They have a glide path to increasing capital based on retaining earnings but the SNB is quite aggressive in wanting them to move earlier.”

The board’s statement, issued after a regularly scheduled meeting, may help quell speculation that Dougan’s job was at risk. Swiss newspapers including Tages-Anzeiger and Der Sonntag, citing unidentified sources, reported last month that the board may be interested in finding a new CEO.

“Pressure is building and if they do have to go to the market to raise equity capital it could have a big impact on the CEO’s position,” Wheeler said.

‘Very Confident’

The board includes representatives from the bank’s two biggest shareholders, Olayan Group of Saudi Arabia and sovereign-wealth fund Qatar Holding LLC, which participated in Credit Suisse’s 10 billion-franc ($10.5 billion) capital increase in October 2008. Koor Industries Ltd. (KOR), a Tel Aviv-based company that also helped the lender raise capital, said in an e- mail this week that it’s “very confident in the bank’s management and performance.”

The Swiss government, the SNB and the market regulator are stepping up efforts to make the country’s biggest banks prepared in the event that the European debt crisis worsens. The Swiss National Bank on June 14 singled out Credit Suisse as needing a bigger capital boost than UBS AG, and put a time-frame on its recommendation.

New Stock

The lender has no plans to sell shares, Dougan told SonntagsZeitung in an interview published on June 17. Some employees, disagreeing with Dougan, favor selling new stock even at current levels to put an end to questions about the firm’s capital strength, four senior managers said in interviews this week.

Credit Suisse’s common equity and contingent convertible bonds, known as CoCos, amounted to about 5.9 percent of risk- weighted assets under Basel 3 at the end of March, the central bank said. That ratio stood at 7.5 percent for UBS, it said. Had the SNB included CoCos to be issued next year in its calculations, Credit Suisse’s capital ratio would have been 7.9 percent, Dougan told SonntagsZeitung. CoCos convert into shares when the bank’s capital ratio falls below a predefined level.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net Liam Vaughan in London at lvaughan6@bloomberg.net.

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net. Edward Evans at eevans3@bloomberg.net.


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