NEW YORK—Credit Suisse Group AG, Switzerland’s second biggest bank, is facing increasing criticism from shareholders and analysts over rejecting calls from the Swiss central bank to raise capital.
In a report released on June 14 the Swiss National Bank urged Credit Suisse to raise capital or cut dividends, which caught the bank by surprise. According to the central bank, Credit Suisse’s capital ratio under the new Basel 3 (a global regulatory standard) stands at around 5.9 percent, including equity and contingent convertible bonds. The same ratio at chief competitor UBS was 7.9 percent.
The news sent shares of Credit Suisse tumbling, hitting a 20-year low on June 14. Nevertheless, Brady Dougan, CEO of Credit Suisse, said that raising capital is not in the cards.
Last week, Dougan criticized the central bank’s calculation methodologies, saying that they assumed very pessimistic outcomes for the European debt crisis. In addition, the bank is working closely with FINMA, the Swiss securities regulator, to monitor capital and equity requirements.
“We assume that we will generate enough profit in the coming quarters to create extra equity capital,” Dougan said on June 17 in an interview with Switzerland’s SonntagsZeitung newspaper. “That is not just bad for us but for the whole financial center,” he added, noting that recent revelations have affected the confidence of investors and clients.
Despite Dougan’s confidence, investors have sold off Credit Suisse’s shares, and the unusually defensive public spat with regulators has raised questions over Dougan’s leadership. According to a Wall Street Journal report, some Credit Suisse bankers have grumbled about Dougan’s recent performance as chief executive.
Recent events are a departure from Credit Suisse’s recent history. The bank largely steered clear of financial disaster—during the 2008 financial crisis—and avoided some of the negative announcements that plagued UBS during the same period. Much of that has been credited to Dougan’s leadership.
In a statement last Sunday, Credit Suisse’s board of directors backed Dougan and said that it was comfortable with the bank’s capital adequacy and progress made toward meeting Basel 3 ratio requirements.
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