CREDIT Suisse has no plans to issue new shares after the Swiss central bank called on it to improve its capital base, chief executive Brady Dougan was quoted as saying yesterday.
“Of course I am disappointed. FINMA has given us directions as to how we should strengthen capital. We are fulfilling those,” said Dougan.
“Even more surprising were the suggestions by the SNB to cut the dividend and to raise capital.”
In its annual financial stability report published last Thursday, the SNB said Credit Suisse should urgently boost its loss-absorbing capital base by cutting risk, suspending dividends or issuing shares, sending the stock down 10 per cent.
While it is the SNB’s job is to guard the stability of the Swiss financial system, the Finma regulator polices the banks and has not demanded any immediate action from Credit Suisse.
Dougan rejected the idea of a capital hike: “That is not our plan,” he told the SonntagsZeitung paper.
He said the SNB’s calculations of Credit Suisse’s capital were incomplete and based on a very pessimistic scenario for the Eurozone debt crisis, adding the report had shaken the confidence of clients and investors: “That is not just bad for us but for the whole financial centre.”
Dougan said SNB Chairman Thomas Jordan had not discussed the need for Credit Suisse to cut its dividend and raise capital when the two men met for lunch just 10 days ago.
The SNB calculated that Credit Suisse had a Tier 1 capital ratio of 5.9 per cent at the end of March, compared with 7.5 per cent for rival UBS, as calculated under global Basel III rules that demand banks reach 10.5 per cent by 2019.
The criticism from the SNB has also increased pressure on Dougan, who was lauded for navigating the bank through the subprime crisis relatively unscathed but has come under fire of late for squandering that advantage.
Credit Suisse responded last week by noting it exceeded current Swiss capital requirements and was working towards meeting stricter rules by 2019.
City A.M. Reporter