Audio Posts and Shared Links Audio Sources - Full Text Articles

Credit Suisse could go bust if the ECB follows up on its rate hike promise, ‘Dr. Doom’ Nouriel Roubini says

Listen to this article
nouriel roubiniNouriel Roubini

REUTERS/Mike Segar

  • Credit Suisse could fold if Europe’s central bank raises interest rates as planned, Nouriel Roubini warned.
  • “If ECB hikes by 50bps it is possible that CS goes bust over the weekend,” the “Dr. Doom” economist said. 
  • Shares in the scandal-hit Swiss bank tumbled Wednesday as fears grew of a banking crisis.

Credit Suisse could fold if the European Central Bank (ECB) follows up on its planned hike in interest rates, “Dr. Doom” economist Nouriel Roubini has warned. 

The struggling Swiss banking giant came under pressure Wednesday after its biggest shareholder, the Saudi National Bank, said it wouldn’t able to inject more cash into the lender. The chance Credit Suisse could default on its debt alarmed investors, sparking a steep selloff in its shares.

The ECB is due to release its latest monetary policy decision later Thursday, where markets are pricing in a rise of 25 basis points in interest rates. A hike that size would show a change in plan for the central bank, which has signaled a 50 basis point increase.

“If ECB hikes by 50bps it is possible that CS goes bust over the weekend & then the ECB has to reverse itself by next week,” Roubini said in a Wednesday tweet

“So hopefully it will not repeat the mistake made in 2011 during the EZ crisis when it hiked into that crisis. ECB/SNB need to give CS some liquidity lifeline,” he said.

The Swiss National Bank, or SNB, appeared to provide a lifeline late Wednesday when Credit Suisse said it would borrow $54 billion from the central bank to strengthen its liquidity.

On Thursday, Credit Suisse shares were reversing on some of Wednesday’s tumble thanks to the loan news. Its shares in Zurich were trading 25% higher at last check, while its US-listed stock was 5% higher in premarket.

Roubini has previously sounded the alarm on Credit Suisse, saying it risks causing a “Lehman moment” and might be “too big to be saved.” 

And in his mention of the “EZ crisis,” Roubini was referring to the eurozone’s debt problems 12 years ago. The ECB’s ill-timed rate hikes during the debt crisis ended up rattling confidence in the European banking system. 

Read the original article on Business Insider
WP Radio
WP Radio