Credit Suisse to bring forward CoCo bond sale
Chief Executive Brady Dougan has come under pressure after the Swiss National Bank said earlier this month that Credit Suisse had not boosted its capital quickly enough.
Credit Suisse, which unlike rival UBS did not have to take government aid during the financial crisis, has also suffered a three-notch downgrade of its long-term debt by ratings agency Moody’s.
Citing sources, the NZZ am Sonntag said that the bank’s board met in London on Friday and was compiling a list of possible successors to Dougan, even though the question of who should be chief executive was not formally on the agenda.
The bank’s board backed the current management team in a statement on Friday.
“There’s no one better than Brady Dougan,” the paper quoted a source close to the board as saying.
Dougan is widely lauded for avoiding a government bailout in 2008, but he has since fallen out of favour with some investors, who criticise his failure to scale back Credit Suisse’s investment bank enough in the face of far stricter Swiss and international capital requirements for riskier businesses.
The SNB has told Credit Suisse to take whatever action necessary, such as suspending dividends, issuing new shares and cutting risk, to increase its common equity Tier 1 capital to shield Switzerland from the “substantial risk” to the country if a euro zone bank collapses.
The NZZ am Sonntag said the bank might issue contingent convertible bonds - known as CoCos and which convert into equity if a bank runs into trouble - before October 2013, the date originally planned. This would raise risk-absorbing capital by 2 percentage points to 8 percent.
According to the paper, the sovereign wealth fund of Qatar and the Olayan Group of Saudi Arabia had agreed to buy the CoCos in 2013 and would have to agree to the change.
A spokesman for Credit Suisse declined to comment on the report.
Under strict new capital rules drawn up after the crisis, Switzerland has encouraged its two biggest banks, UBS and Credit Suisse, to issue CoCo bonds to bolster their financial strength.
But international regulator the Financial Stability Board decided in July that only top-quality capital, not hybrid debt or CoCos, would qualify to meet the additional capital requirements imposed on the world’s top banks.—Agencies