Credit Suisse announced a series of measures, including an issue of convertible bonds, asset sales and cost cuts, to collectively boost its capital base by CHF8.7bn (US$8.9bn) in response to a call from the Swiss central bank.
The Swiss National Bank (SNB) said last month that Credit Suisse needed to increase its reserves as it was “too big to fail”, and that a stronger capital buffer would better protect it against losses arising from the eurozone crisis or the weak global economy.
“The measures we have announced today should eliminate any of the doubt raised by the SNB report,” said Credit Suisse chief executive officer (CEO), Brady Dougan, in a conference call. The measures would increase its core capital ratio to 9.4% by the end of the year.
Credit Suisse said CHF3.8bn of the reserves being raised will come from contingent convertible bonds (coco bonds) placed to investors from Qatar, Saudi Arabia and Singapore. It would also increase its cost-saving target to CHF3bn after cutting CHF2bn in costs in the first half of the year.
A statement issued by the SNB welcomed the move. “These measures lead to a rapid and significant increase of the loss absorbing capital of Credit Suisse Group,” it read. “In an environment that remains particularly challenging for the international banking system, these measures substantially increase [the group’s] resilience.”
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