SWITZERLAND - The Swiss Foundation for Sustainable Development Ethos has voiced its opposition to the creation of a conditional capital pool at Credit Suisse.
The conditional capital without pre-emptive rights, which corresponds to 42% of the issued capital, will be used to cover the contingent convertible bonds (CoCos) that will be issued to reinforce its core equity base.
Dominique Biedermann, Ethos' executive director said: "Ethos opposes the pursuit of the trading activities in the investment bank.
"These activities are very capital intensive and carry risks that are not in line with the long-term interests of Credit Suisse's shareholders. Without these activities, the issuance of CoCos is not necessary."
Ethos said it opposed the pursuit of the trading activities in the investment bank of Credit Suisse for a number of reasons, including that trading in the investment bank required too much equity compared to the equity required for the traditional activities of the bank, as well as that an investment bank's trading results were very volatile and not necessarily profitable in the long run.
According to Ethos' calculations, the cumulative economic loss from volatile investing was estimated at approximately CHF7bn (€5.4bn) in the last seven years.
The lobbying group further argued that the remuneration of the 20,000 employees of the investment bank was excessive, corresponding to CHF388,000 on average per employee per annum, as well as that the risks taken by investment banks could be viewed as excessive.
Two-thirds of shareholder equity - an equivalent of CHF20bn - is currently used to back Credit Suisse's investment bank's trading activities. To reinforce the bank's core equity and avoid issuing CoCos, Ethos opposed the payment of a CHF1.5bn dividend.
The foundation also opposed the remuneration reports of UBS and Credit Suisse despite several amendments introduced in the remuneration system last year in response to serious shareholders concerns.
It believed that the variable remuneration remained high and was not being capped.
More than 80% of the remuneration of the executive management was variable, which could lead to behaviour not in the long-term interests of shareholders. It said that at Credit Suisse this was especially surprising since the net income objectives of the variable remuneration were not achieved.
Elsewhere, Swiss financial services group Mirabaud has signed up as a member of the Hedge Funds Standards Board (HFSB), emphasising its commitment to the promotion of best practices in hedge fund management.
Mirabaud is now a signatory to the organisation's principles alongside other companies active in the alternative investment sector. The implementation of best practice principles for the industry - Hedge Fund Standards - was conceived in response to growing investor concern about transparency, risk management, governance and shareholder behaviour.