(Bloomberg) — Credit Suisse Group AG Chief Executive Officer Tidjane Thiam said he sees the risk of a “traumatic event” in global markets once the current period of low interest rates comes to an end.
“Frankly, it’s quite likely that there will be at the end of all this period a relatively traumatic event,” Thiam, 53, said in an interview with Bloomberg Television on Tuesday in New York. “It’s quite likely that interest rates will rise and there will be impacts in the real economy, the real world. So as a financial-services company, we have to position ourselves quite defensively.”
Speculation about the Federal Reserve’s rate outlook has prompted swings in securities markets as investors assess whether the global economy is strong enough to withstand a U.S. rate increase. Futures markets show that there’s a 66 percent chance the Fed will raise borrowing costs for the first time in nine years on Dec. 16, while European Central Bank President Mario Draghi pledged to boost stimulus to bolster growth across the euro area.
Earlier expectations for a delay until March had to be trimmed after Fed Chair Janet Yellen told U.S. lawmakers that action next month remains a “live possibility,” a case later bolstered by American job gains.
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“Every time you see in markets, when you go from a high- rate environment to a low-rate environment or from a low to a high-rate environment, experience shows that a number of people are caught unprepared,” Thiam said. “That is likely to happen again.”
The comments were part of an interview in which Thiam discussed the opportunity for the bank to expand in managing money for wealthy clients across Asia and the strengths of the firm’s securities unit. The CEO last month announced a plan to reorganize Credit Suisse along geographical lines, cut as many as 5,600 jobs and focus more on wealth management while shrinking and splitting up the investment bank.
“Why do we want to be in wealth management? Because the world is getting wealthier,” said Thiam, who replaced Brady Dougan in July. “That’s a huge opportunity.”
The second-largest Swiss bank after UBS Group AG remains “very focused” on emerging markets including China, where “we have been underweight,” Thiam said. Credit Suisse needs the investment bank to help Asian billionaires with illiquid assets who need access to financing, he said.
“For billionaires it is important to have the investment bank alongside wealth management, you need a really good investment bank,” Thiam said.