Late in 2010, Credit Suisse CEO Brady Dougan and his team closed in on the choice of whether or not to issue contingent capital, which Swiss regulators would necessitate by 2019.
There were a range of noteworthy problems in front of Dougan and his team, including whether contingent capital would supply adequate loss absorption when called upon, would there be sufficient demand for this new instrument, would it be cost effective capital, and what were the risks to Credit Suisse' reputation with clients and regulators if a problem did not go well? In addition, The Basel Committee, the body that advocated global bank capital standards, had determined that much of the existing bank "hybrid debt" would no longer count as capital for regulatory purposes, meaning banks would have to replace this part of their equity accounts with another type of capital. However, Basel had yet to decide whether contingent capital would be allowable in the new "Basel III" regulatory regime.
PUBLICATION DATE: August 18, 2011 PRODUCT #: 312007-HCB-ENG
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