Credit Suisse Stands Behind CEO Dougan

In an unusual move, the board of Credit Suisse Group AG Friday issued a statement to back Chief Executive Brady Dougan, saying it is confident management's plans to bolster capital will ensure Switzerland's No. 2 bank meets and exceeds regulatory requirements.

Dougan's problems have been building in recent days. Last week, he was caught up in an unusual public spat with Switzerland's central bank over whether Credit Suisse's capital cushion is adequate. Meanwhile, the Swiss bank's stock has fallen sharply and some of its bankers are grumbling about Dougan's performance as chief executive.

The questions about Dougan have intensified in recent days and represent an unwelcome distraction for the bank, which has prided itself on avoiding much of the turmoil that has befallen its larger rival, UBS AG.

The board has now moved to quell any speculation about Dougan's future at the bank, saying it was comfortable with the progress that has been made toward meeting the Basel III capital requirements.

The spat with the central bank stems from the fact that some of Credit Suisse's capital is still held in the form of bonds, which will turn into equity later. The bank more than meets current requirements, but under the strict Basel III rules, which will come into force in 2019, this capital doesn't count. The central bank's criticism centered on that fact, as it said if the euro-zone crisis turns markedly worse, such equity capital is lacking.

Moody's Investors Service's long-anticipated downgrade of more than a dozen global banks, including Credit Suisse and UBS, to some extent supports Credit Suisse's claim that its capital is adequate. Only two banks—Royal Bank of Canada and HSBC Holdings PLC—are rated higher.

"We are pleased that Moody's continues to recognize Credit Suisse as one of the most highly rated banks in its peer group, citing our balanced business portfolio, strong liquidity position, improving capital position as well as our low exposure to the peripheral European economies," said Chief Financial Officer David Mathers in a statement.

Credit Suisse had its deposit and senior debt ratings rating cut three notches to A1 with a stable outlook from Aa1 in Moody's review of 17 banks with global capital markets operations.

Credit Suisse shares ended 0.6% lower Friday at 17.95 Swiss francs. The shares have lost around a fifth of their value this year, compared with a small increase in the price of rival UBS's stock. Compared with their most recent peak in late 2009, Credit Suisse shares have lost more than 70% of their value.

That has eroded the internal standing of the once-popular Dougan and drawn criticism from investors.

But Dougan has plenty of defenders. He helped Credit Suisse navigate the financial crisis and substantially strengthened the bank's capital buffers. More recently, Dougan has won plaudits for an aggressive two-year, 2 billion Swiss franc ($2.09 billion) cost-cutting campaign that the bank says is exceeding targets.

Another factor working in his favor: The bank lacks obvious candidates to succeed him.

This story first appeared on WSJ.com.

Write to Anita Greil at anita.greil@dowjones.com