1 00:00:01,920 --> 00:00:05,440 Speaker 1: This is Bloomberg Daybreak Weekend. I'm Tom Busby in New York. 2 00:00:05,559 --> 00:00:08,039 Speaker 1: This week a special edition of the show after what's 3 00:00:08,039 --> 00:00:11,600 Speaker 1: been in historic week in the financial markets, marked by 4 00:00:11,640 --> 00:00:15,160 Speaker 1: crisis in the global banking industry. The meltdown of Silicon 5 00:00:15,240 --> 00:00:18,880 Speaker 1: Valley Bank spread across the sector, touching signature bank first 6 00:00:18,920 --> 00:00:21,959 Speaker 1: Republic and then to Europe and Credit Suis. It's a 7 00:00:21,960 --> 00:00:24,760 Speaker 1: story that played out right here on Bloomberg in exclusive 8 00:00:24,760 --> 00:00:27,440 Speaker 1: interviews that move shares of Credit Suite throughout the week. 9 00:00:27,880 --> 00:00:30,440 Speaker 1: On this show, we usually look forward, but today we're 10 00:00:30,480 --> 00:00:33,519 Speaker 1: looking back, covering the timeline of events that got us 11 00:00:33,600 --> 00:00:36,479 Speaker 1: where we are right now. Full disclosure, we're taking this 12 00:00:36,560 --> 00:00:40,080 Speaker 1: program on Friday, so it's decidedly a look back and 13 00:00:40,280 --> 00:00:42,400 Speaker 1: not a view of what's to come. But stay tuned 14 00:00:42,400 --> 00:00:45,000 Speaker 1: to our news updates every thirty minutes throughout the weekend 15 00:00:45,040 --> 00:00:48,559 Speaker 1: for the latest developments. We start on Wednesday morning. The 16 00:00:48,640 --> 00:00:52,160 Speaker 1: chair of Credit Suis's largest shareholder, the Saudi National Bank, 17 00:00:52,440 --> 00:00:56,120 Speaker 1: spoke to Bloomberg saying he wasn't open to injecting further 18 00:00:56,240 --> 00:00:59,400 Speaker 1: cash into the Swiss lender. The answer is absolutely not, 19 00:01:00,080 --> 00:01:04,560 Speaker 1: for many reasons outside the simplest reason, which is regulatory 20 00:01:04,680 --> 00:01:08,560 Speaker 1: and statutory We now own nine point eight percent of 21 00:01:08,560 --> 00:01:10,800 Speaker 1: the bank. If we go abuff ten percent, all kinds 22 00:01:10,840 --> 00:01:14,160 Speaker 1: of new rules kick in. More on that interview later 23 00:01:14,200 --> 00:01:17,200 Speaker 1: this hour. It caused Credit Suite's share price to tumble 24 00:01:17,200 --> 00:01:19,959 Speaker 1: to a new record low, sparking concern about the strength 25 00:01:19,959 --> 00:01:23,319 Speaker 1: of global lenders after the swift collapse of three US 26 00:01:23,360 --> 00:01:26,319 Speaker 1: banks in the last week. Now. On Thursday, the CEO 27 00:01:26,319 --> 00:01:28,840 Speaker 1: of Credit Sweee told his staff to focus on facts 28 00:01:28,959 --> 00:01:31,600 Speaker 1: as he pledged to rapidly move ahead with a plan 29 00:01:31,720 --> 00:01:35,520 Speaker 1: to streamline operations. In a memo to staff, Ulric Corner 30 00:01:35,600 --> 00:01:38,320 Speaker 1: said the bank would continue to focus on the transformation 31 00:01:38,360 --> 00:01:41,759 Speaker 1: of Credit Suites from a position of strength. That memo 32 00:01:41,840 --> 00:01:44,160 Speaker 1: came after the bank said it reached an agreement with 33 00:01:44,240 --> 00:01:47,120 Speaker 1: the Swiss National Bank to borrow as much as fifty 34 00:01:47,160 --> 00:01:51,360 Speaker 1: four billion dollars from a liquidity facility. Flashback to Monday, 35 00:01:51,400 --> 00:01:54,800 Speaker 1: that same CEO was on Bloomberg telling off Francine Laquis 36 00:01:54,880 --> 00:01:58,200 Speaker 1: that the bank had seen inflows of client funds, which 37 00:01:58,200 --> 00:02:01,920 Speaker 1: happened after markets and banks were pummeled by the collapse 38 00:02:01,960 --> 00:02:04,800 Speaker 1: of Silicon Valley Bank. So as we be, as you know, 39 00:02:04,880 --> 00:02:09,040 Speaker 1: it's a very recent thing which happened so far, it's 40 00:02:09,080 --> 00:02:15,160 Speaker 1: pretty calm even so material good inflows yesterday. Still Also, 41 00:02:15,400 --> 00:02:17,240 Speaker 1: you know, I had a client meeting which was very 42 00:02:17,240 --> 00:02:20,000 Speaker 1: positive on everyone. So so far it's cold, but I 43 00:02:20,000 --> 00:02:22,520 Speaker 1: think it's early days to look at the calm. Are 44 00:02:22,560 --> 00:02:25,440 Speaker 1: you suggesting that you could also actually get inflows? We 45 00:02:25,560 --> 00:02:28,520 Speaker 1: got them yesterday, which is a positive sign, I would say, 46 00:02:29,520 --> 00:02:31,959 Speaker 1: and you know, for us, and that is maybe a 47 00:02:32,000 --> 00:02:33,680 Speaker 1: little bit if I may say so, fun seeing in 48 00:02:33,680 --> 00:02:36,240 Speaker 1: comparison to SVB, it's a very different situation. You know, 49 00:02:36,360 --> 00:02:39,519 Speaker 1: we are GCP, as you know, we are following materially 50 00:02:39,760 --> 00:02:42,560 Speaker 1: different and higher standards when it comes to capital funding, 51 00:02:42,639 --> 00:02:45,200 Speaker 1: liquidity and so on. And that's why we said, you know, 52 00:02:45,240 --> 00:02:47,959 Speaker 1: we gave I think this situation is important. We gave 53 00:02:48,520 --> 00:02:52,320 Speaker 1: r capital ratio of like hundred and forty forty at 54 00:02:52,400 --> 00:02:54,519 Speaker 1: the at the end of Q four, which is strong ratio, 55 00:02:54,800 --> 00:02:57,720 Speaker 1: which has improved as we went through this quarter to 56 00:02:57,840 --> 00:03:01,000 Speaker 1: like hundred and fifty on average and being even high 57 00:03:01,040 --> 00:03:05,239 Speaker 1: on that. But so outflows have not reversed, but they've 58 00:03:05,280 --> 00:03:10,440 Speaker 1: actually lowered. What are they reversing? Look, they have significantly moderated. 59 00:03:10,480 --> 00:03:12,640 Speaker 1: As I put it, we gave an update on February 60 00:03:12,760 --> 00:03:14,840 Speaker 1: nine in terms of where we are deposits and add 61 00:03:14,960 --> 00:03:16,959 Speaker 1: ass and so only we give next update with the 62 00:03:17,000 --> 00:03:20,040 Speaker 1: first quarter result. But this is also very clear. You 63 00:03:20,080 --> 00:03:22,239 Speaker 1: know if and we talked about that, what has happened 64 00:03:22,280 --> 00:03:26,480 Speaker 1: in like fourth quarter. You know, we are fully focused 65 00:03:26,520 --> 00:03:28,960 Speaker 1: on it, turn it around, but that takes longer than 66 00:03:29,040 --> 00:03:31,400 Speaker 1: like just two months. But then you do you have 67 00:03:31,480 --> 00:03:34,840 Speaker 1: this material weakness today? What happened there? There's concern that 68 00:03:34,960 --> 00:03:38,080 Speaker 1: actually almost every day there's some kind of bad news 69 00:03:38,080 --> 00:03:40,000 Speaker 1: and you have your share price at a record low 70 00:03:40,040 --> 00:03:42,480 Speaker 1: like that can't be a comfortable position, no, But we 71 00:03:42,960 --> 00:03:45,960 Speaker 1: published our report today as we have seen the financial result. 72 00:03:46,040 --> 00:03:48,920 Speaker 1: I think that's a key message. The financial result is 73 00:03:49,000 --> 00:03:53,520 Speaker 1: unchanged for twenty twenty two and previous years. We delayed 74 00:03:53,560 --> 00:03:56,240 Speaker 1: the reporters you have seen a couple of days to 75 00:03:56,600 --> 00:04:00,960 Speaker 1: approbately deal with you know question the SEC head and 76 00:04:01,040 --> 00:04:05,400 Speaker 1: we did, and that is part of an longer ongoing dialogue. 77 00:04:05,800 --> 00:04:08,720 Speaker 1: And we acknowledge that we haven't metier weakness in the 78 00:04:08,800 --> 00:04:14,640 Speaker 1: financial independential reporting control, which we are addressing and imediating forcefully. 79 00:04:15,280 --> 00:04:17,040 Speaker 1: How are you addressing that? So is that an auditor 80 00:04:17,120 --> 00:04:20,360 Speaker 1: problem had PwC on the case. Is it their fault? No, 81 00:04:20,440 --> 00:04:23,279 Speaker 1: it's absolutely not their fault. That is obviously you know 82 00:04:23,360 --> 00:04:25,960 Speaker 1: that cause higher hand in hand as you work together 83 00:04:26,000 --> 00:04:28,520 Speaker 1: with your auditor. But it's a collective fining and we 84 00:04:28,520 --> 00:04:31,080 Speaker 1: are addressing it. We have immediation planner. We are addressing it. 85 00:04:31,320 --> 00:04:34,279 Speaker 1: So you have an anchor investor that put one point 86 00:04:34,320 --> 00:04:37,120 Speaker 1: five million in the bank, now their share value has 87 00:04:37,160 --> 00:04:40,080 Speaker 1: gone down by one third? Will they have to inject more? 88 00:04:40,160 --> 00:04:43,080 Speaker 1: What kind of conversations are you having with them? No, Look, 89 00:04:43,160 --> 00:04:45,719 Speaker 1: nobody is pleased develot the Shaperrice development, you know, but 90 00:04:45,800 --> 00:04:47,760 Speaker 1: we match what we can match. And this is the 91 00:04:47,839 --> 00:04:50,480 Speaker 1: execution of our plan. That's a white swag. This is 92 00:04:50,480 --> 00:04:53,320 Speaker 1: a white plan. We are executing at pace and even 93 00:04:53,320 --> 00:04:55,520 Speaker 1: ahead of the plan. And I think I'll shall to 94 00:04:55,600 --> 00:04:58,960 Speaker 1: see that as well. That's an unpleasant situation. Chaprice for Dicom, 95 00:04:59,000 --> 00:05:02,360 Speaker 1: manage Chaprice, manage the executioner. I do. So you don't 96 00:05:02,360 --> 00:05:05,560 Speaker 1: think you're getting pressure from shareholders. You're not getting pressure 97 00:05:05,640 --> 00:05:08,080 Speaker 1: from you know, certain big shareholders to do more and 98 00:05:08,120 --> 00:05:10,120 Speaker 1: actually to have all options on the table now as 99 00:05:10,120 --> 00:05:12,680 Speaker 1: I said, they are obviously they're obviously not pleased with 100 00:05:12,760 --> 00:05:15,800 Speaker 1: the development. I'm not pleased with developing the first tent obviously, 101 00:05:15,880 --> 00:05:18,680 Speaker 1: but you know, we are executing, and once we are executing, 102 00:05:18,720 --> 00:05:20,919 Speaker 1: step by step, we show the marketing. This is exactly 103 00:05:20,920 --> 00:05:23,599 Speaker 1: why we said it's this wee years process and we 104 00:05:23,640 --> 00:05:25,720 Speaker 1: are executing, and that is you know, the market will 105 00:05:25,720 --> 00:05:28,760 Speaker 1: acknowledge that and the share proce will follow. Do you 106 00:05:28,760 --> 00:05:30,880 Speaker 1: think all options should be on the table? What about 107 00:05:30,880 --> 00:05:33,039 Speaker 1: breaking up the bank? If you look and I understand 108 00:05:33,160 --> 00:05:35,280 Speaker 1: your frustration with the share price and saying, look, you're 109 00:05:35,279 --> 00:05:37,120 Speaker 1: just executing, but when you look at the share price 110 00:05:37,279 --> 00:05:41,240 Speaker 1: ninety seven percent below that two thousand and seven high, 111 00:05:41,560 --> 00:05:43,600 Speaker 1: like how do you regain from that now? But that 112 00:05:43,760 --> 00:05:45,960 Speaker 1: you can can compare as you know, But you know, 113 00:05:46,440 --> 00:05:50,320 Speaker 1: as I said, it's a right swatgy and fully fully 114 00:05:50,360 --> 00:05:53,360 Speaker 1: convinced off the swagy. We are executing at past we 115 00:05:53,440 --> 00:05:56,080 Speaker 1: have the right team, and you know that's why we 116 00:05:56,120 --> 00:05:58,719 Speaker 1: said in October it needs radical change. You know, the 117 00:05:58,760 --> 00:06:01,120 Speaker 1: bank needs to be changed, and we said it's the 118 00:06:01,160 --> 00:06:03,880 Speaker 1: three years transformation. And you can't come after two months 119 00:06:03,920 --> 00:06:06,800 Speaker 1: and say, look why is not everything done? But radical 120 00:06:06,880 --> 00:06:08,760 Speaker 1: change could be splitting off the bank. Is it something 121 00:06:08,800 --> 00:06:11,880 Speaker 1: that you're valuing. Oh look, the new creates vices focused 122 00:06:11,920 --> 00:06:14,799 Speaker 1: on the course lengths of the bank. This is routs management, 123 00:06:14,800 --> 00:06:17,839 Speaker 1: the swisspend passons asset management. What we put the market 124 00:06:17,839 --> 00:06:22,279 Speaker 1: either trading and sales business that makes entirely sense, entirely 125 00:06:22,320 --> 00:06:26,880 Speaker 1: different risk profile, will be very profitable and well reward shareholders. 126 00:06:26,880 --> 00:06:29,400 Speaker 1: And I think the shelters understand it. When will you 127 00:06:29,480 --> 00:06:32,160 Speaker 1: be able to say, like the worse is really behind us? 128 00:06:32,640 --> 00:06:35,240 Speaker 1: But we said it's three years transformation. We said we 129 00:06:35,240 --> 00:06:38,000 Speaker 1: are going to make a loss unfortunately this year because 130 00:06:38,320 --> 00:06:40,360 Speaker 1: you know, and this is something which you need to understand, 131 00:06:40,400 --> 00:06:43,640 Speaker 1: a lot of the restructuring course you know, baked into 132 00:06:43,640 --> 00:06:46,960 Speaker 1: the transformation are coming in twenty twenty three before we 133 00:06:46,960 --> 00:06:50,240 Speaker 1: see a lot of benefits out of that transformation. And 134 00:06:50,240 --> 00:06:52,080 Speaker 1: that is something which happens. That's why we said it 135 00:06:52,120 --> 00:06:54,479 Speaker 1: takes three years. Three years is a long time work. 136 00:06:54,520 --> 00:06:55,840 Speaker 1: I mean a lot of us, but a lot of 137 00:06:55,880 --> 00:06:58,680 Speaker 1: the shareholders will start asking questions. I mean, have you 138 00:06:58,720 --> 00:07:01,680 Speaker 1: asked them for more money to make it faster? For years, 139 00:07:01,760 --> 00:07:04,000 Speaker 1: especially in this banking world, than anything could happen. No, 140 00:07:04,160 --> 00:07:06,600 Speaker 1: But you know, as I said, our LCR ratio is 141 00:07:06,920 --> 00:07:10,400 Speaker 1: strong and very strong, has has has getting stronger as 142 00:07:10,400 --> 00:07:13,320 Speaker 1: we speak. Our capital ratio is very strong at fourteen 143 00:07:13,360 --> 00:07:16,040 Speaker 1: point one percent as we gave it to Q four, 144 00:07:16,120 --> 00:07:19,080 Speaker 1: So we have everything we need to go through a transformation, Maise. 145 00:07:19,400 --> 00:07:21,440 Speaker 1: Or are you expecting, you know, the first quarter to 146 00:07:21,480 --> 00:07:24,600 Speaker 1: be good enough to keep shareholders off your back? The 147 00:07:24,680 --> 00:07:27,360 Speaker 1: first quarter is, as we said, and we put it 148 00:07:27,480 --> 00:07:29,960 Speaker 1: very clearly, we will make a loss in the first quarter, 149 00:07:30,000 --> 00:07:32,680 Speaker 1: but you will see progress in the first quarter numbers 150 00:07:32,680 --> 00:07:37,120 Speaker 1: in terms of what outflows in certain business momentum. We're 151 00:07:37,160 --> 00:07:40,560 Speaker 1: specifically businessman in the market business for example, which was 152 00:07:40,720 --> 00:07:44,400 Speaker 1: as we all discussed for the for four reasons, clearly 153 00:07:44,480 --> 00:07:47,480 Speaker 1: understandable reasons. A week in the Q four looks better. 154 00:07:47,840 --> 00:07:50,840 Speaker 1: We else management, we are making progress, certainly not yet 155 00:07:50,840 --> 00:07:53,320 Speaker 1: there where we should be, but we are making progress. 156 00:07:53,720 --> 00:07:56,160 Speaker 1: Or are you comfortable with the banking system as a whole? 157 00:07:56,160 --> 00:07:59,080 Speaker 1: I mean, we've we've lived through a pretty incredible couple 158 00:07:59,080 --> 00:08:00,960 Speaker 1: of days and if you look at the markets are 159 00:08:00,960 --> 00:08:03,520 Speaker 1: all over the place. No, I think so, I mean 160 00:08:03,560 --> 00:08:06,240 Speaker 1: this is this is somewhat an isolated problem. If you 161 00:08:06,320 --> 00:08:08,240 Speaker 1: want too and as I said, you know, if you 162 00:08:08,280 --> 00:08:10,440 Speaker 1: are gusipit or if you look at the large banks. 163 00:08:10,800 --> 00:08:12,960 Speaker 1: I think we will manage to it. Talk to me 164 00:08:12,960 --> 00:08:15,040 Speaker 1: a little bit about Cratie Sweets First Boston. So first 165 00:08:15,080 --> 00:08:17,880 Speaker 1: of all, what's the timeline for the IPO. The timeline's 166 00:08:17,880 --> 00:08:20,240 Speaker 1: fan seen is unchanged as it discussed last time. So 167 00:08:20,320 --> 00:08:22,400 Speaker 1: we have a very clear plan to put it into market, 168 00:08:23,360 --> 00:08:26,000 Speaker 1: create an liquidity event most likely in IPO. We are 169 00:08:26,000 --> 00:08:29,880 Speaker 1: working against our internal plans forcefully, and I would expect 170 00:08:29,880 --> 00:08:31,760 Speaker 1: such an event in like twenty twenty five. As I 171 00:08:31,800 --> 00:08:34,120 Speaker 1: said earlier, Okay, any news I mean today you had 172 00:08:34,440 --> 00:08:36,319 Speaker 1: news about the you know, twenty percent that would go 173 00:08:36,360 --> 00:08:40,920 Speaker 1: to Critzwe's First Boston partners. What happens to the rest? Right? 174 00:08:41,040 --> 00:08:44,720 Speaker 1: The rest is owned by us and obviously also portioned 175 00:08:44,720 --> 00:08:48,520 Speaker 1: by Michael as we as we announce it in like February, 176 00:08:49,080 --> 00:08:51,000 Speaker 1: and the rest is own past So this is this 177 00:08:51,120 --> 00:08:54,400 Speaker 1: is our Our part of the bank remains all part 178 00:08:54,400 --> 00:08:56,840 Speaker 1: of the bank. We are going into liquidity and again 179 00:08:56,920 --> 00:09:00,319 Speaker 1: most likely IPO. You will be probably a majority and 180 00:09:00,400 --> 00:09:03,280 Speaker 1: let me make decision. You know how our holding develops 181 00:09:03,280 --> 00:09:05,640 Speaker 1: over the next following in So you're still looking for 182 00:09:05,679 --> 00:09:10,560 Speaker 1: an anchor investor? Are you closer to finding well? I 183 00:09:10,600 --> 00:09:13,280 Speaker 1: don't know. We are close to but I'm not sure 184 00:09:13,280 --> 00:09:15,560 Speaker 1: if it's anchor investor. We have a lot of interest 185 00:09:16,280 --> 00:09:19,040 Speaker 1: from sir parties to be invested into that. It tells 186 00:09:19,040 --> 00:09:21,840 Speaker 1: you something about the surge, I would say, and we 187 00:09:21,880 --> 00:09:26,559 Speaker 1: are evaluating that Middle Eastern investors, different kinds of investors, 188 00:09:26,559 --> 00:09:28,599 Speaker 1: different parts of the world. A couple of weeks it 189 00:09:28,640 --> 00:09:30,920 Speaker 1: will come before the first quarter. I will tell the 190 00:09:31,000 --> 00:09:32,880 Speaker 1: market if we are there. What do you find most 191 00:09:32,880 --> 00:09:37,560 Speaker 1: difficult about your job is to make it understandable. I 192 00:09:37,640 --> 00:09:40,520 Speaker 1: would say, you know that we are absolutely doing the 193 00:09:40,600 --> 00:09:43,720 Speaker 1: right things that we need some time to get through. 194 00:09:44,960 --> 00:09:47,600 Speaker 1: And and this is what all my colleagues and I 195 00:09:47,800 --> 00:09:50,600 Speaker 1: try to do, you know, to regain the trust of 196 00:09:50,760 --> 00:09:53,360 Speaker 1: the bank over the next couple of months. But is 197 00:09:53,400 --> 00:09:57,000 Speaker 1: it more important to regain the trust of shareholders or 198 00:09:57,360 --> 00:10:01,960 Speaker 1: or clients? It is look client, I told you last time. 199 00:10:02,000 --> 00:10:05,160 Speaker 1: Clients is I would say, one of the best experience, 200 00:10:05,360 --> 00:10:08,679 Speaker 1: even in this very difficult months last year. I mean, 201 00:10:08,679 --> 00:10:12,600 Speaker 1: they are so supportive of us, they are listening to us, 202 00:10:12,800 --> 00:10:15,680 Speaker 1: they're doing active things to support They like to bank 203 00:10:15,800 --> 00:10:18,960 Speaker 1: with credit. Switz is a fantastic experience. But you know, 204 00:10:19,040 --> 00:10:21,560 Speaker 1: the convincing of this is the right thing to do. 205 00:10:21,720 --> 00:10:24,040 Speaker 1: The executing at pace and the head of plan is 206 00:10:24,040 --> 00:10:27,120 Speaker 1: with all different stakeholders, all different months. That's Credit Suite 207 00:10:27,200 --> 00:10:32,080 Speaker 1: CEO all recorders speaking with Bloomberg's Francine Laqui on Monday. Now, 208 00:10:32,120 --> 00:10:35,000 Speaker 1: as we all know, things got worse from there. Up next, 209 00:10:35,280 --> 00:10:37,640 Speaker 1: we'll hear more from the chair of the Saudi National 210 00:10:37,679 --> 00:10:40,680 Speaker 1: Bank and its concerns about the financial health of Credit Suites. 211 00:10:41,120 --> 00:10:44,080 Speaker 1: You're listening to a special edition of Bloomberg Daybreak Weekend. 212 00:10:44,120 --> 00:10:47,000 Speaker 1: I'll look back at an historic week in the markets 213 00:10:47,040 --> 00:10:50,800 Speaker 1: and crisis in the banking sector. This program was recorded 214 00:10:50,800 --> 00:10:53,480 Speaker 1: on Friday. If you're looking for the latest developments on 215 00:10:53,520 --> 00:10:55,640 Speaker 1: this story, make sure to stay tuned to our news 216 00:10:55,720 --> 00:10:59,240 Speaker 1: updates twice an hour all weekend long on Bloomberg Radio. 217 00:11:09,640 --> 00:11:13,080 Speaker 1: This is Bloomberg Daybreak Weekend. I'm Tom Busby. This week 218 00:11:13,120 --> 00:11:15,840 Speaker 1: a special edition of the show. It's been in historic 219 00:11:15,920 --> 00:11:19,760 Speaker 1: week in financial markets, marked by crisis in the banking industry. 220 00:11:20,040 --> 00:11:22,800 Speaker 1: The meltdown of Silicon Valley Bank spread across the sector, 221 00:11:22,880 --> 00:11:27,240 Speaker 1: touching Signature Bank, First Republic and eventually Credit Suis. It's 222 00:11:27,240 --> 00:11:29,560 Speaker 1: a story they've played out right here on Bloomberg in 223 00:11:29,640 --> 00:11:33,160 Speaker 1: exclusive interviews that moved shares of Credit Suits throughout the week. 224 00:11:33,480 --> 00:11:36,040 Speaker 1: On this show, we usually look forward, but today we're 225 00:11:36,040 --> 00:11:38,880 Speaker 1: looking back, covering the timeline of events that got us 226 00:11:38,960 --> 00:11:42,079 Speaker 1: to where we are right now. Full disclosure, we're taping 227 00:11:42,080 --> 00:11:44,880 Speaker 1: this program on Friday, so it's decidedly a look back, 228 00:11:45,360 --> 00:11:47,720 Speaker 1: not a view of what's to come. But stay tuned 229 00:11:47,760 --> 00:11:50,240 Speaker 1: to our news updates every thirty minutes throughout the weekend 230 00:11:50,400 --> 00:11:53,760 Speaker 1: for the latest developments. On Wednesday, at top shareholder ruled 231 00:11:53,800 --> 00:11:57,080 Speaker 1: out adding to its stake in Credit Suite, deepening the 232 00:11:57,160 --> 00:12:00,319 Speaker 1: crisis at the Swiss bank and leaving its leaders uggling 233 00:12:00,320 --> 00:12:02,720 Speaker 1: to shore up confidence in mid market chaos that spread 234 00:12:02,760 --> 00:12:06,080 Speaker 1: from Europe to the US. The chairman of Saudi National Bank, 235 00:12:06,120 --> 00:12:09,680 Speaker 1: which became Credit Sweet's biggest shareholder late last year, said 236 00:12:09,720 --> 00:12:12,679 Speaker 1: that the bank would not boost its share in the 237 00:12:12,760 --> 00:12:15,400 Speaker 1: lender past the current level of just under ten percent. 238 00:12:15,920 --> 00:12:19,760 Speaker 1: Amar El Kudari spoke exclusively to Bloomberg's use of Kamal 239 00:12:19,920 --> 00:12:22,839 Speaker 1: l Dean in terms of your expectations for the FED, 240 00:12:23,360 --> 00:12:27,400 Speaker 1: You've seen what happened with SVB and the sort of 241 00:12:27,440 --> 00:12:29,920 Speaker 1: the fallout from that. You think the FED is done 242 00:12:29,920 --> 00:12:31,559 Speaker 1: for the year. Or you think they're going to continue 243 00:12:31,559 --> 00:12:36,760 Speaker 1: to high altitly, that's gonna channel back into the Saudi 244 00:12:36,800 --> 00:12:39,800 Speaker 1: obsolute obsolute. It's a little bit top off my pay grade. 245 00:12:39,800 --> 00:12:44,320 Speaker 1: But if my personal opinion is they're not dumb, the 246 00:12:44,320 --> 00:12:48,199 Speaker 1: the inflation situation is proving to be more sticky than 247 00:12:48,480 --> 00:12:51,679 Speaker 1: than they had originally hoped for, and they're gonna have 248 00:12:51,720 --> 00:12:55,640 Speaker 1: to you know, um, they might delay it a little 249 00:12:55,679 --> 00:12:58,199 Speaker 1: bit so that they make sure the ecosystem does not 250 00:12:58,360 --> 00:13:04,120 Speaker 1: create another SVB, but but they will have to continue 251 00:13:04,160 --> 00:13:07,880 Speaker 1: the journey to make sure to suppress inflation. We're coming 252 00:13:08,040 --> 00:13:10,000 Speaker 1: off the bank of a strong set of earnings that 253 00:13:10,120 --> 00:13:13,920 Speaker 1: beat expectations from animists. You kind of take that momentum 254 00:13:13,960 --> 00:13:16,319 Speaker 1: into the remainder of the year. What are your expectations 255 00:13:16,320 --> 00:13:18,520 Speaker 1: for credit growth? How are you going to manage the 256 00:13:18,559 --> 00:13:25,000 Speaker 1: difficult rates environment globally? You know, it's unfortunate that the 257 00:13:25,040 --> 00:13:28,160 Speaker 1: globe has to move to some degree in unison when 258 00:13:28,200 --> 00:13:31,199 Speaker 1: it comes to interest rates, because it's money is fungible 259 00:13:31,280 --> 00:13:36,880 Speaker 1: and it is an open economy. US has an inflation 260 00:13:36,920 --> 00:13:40,800 Speaker 1: problem to deal with, and these increases in interest rates 261 00:13:42,920 --> 00:13:47,000 Speaker 1: for sure causes a drag on your ability to grow faster. 262 00:13:47,520 --> 00:13:53,000 Speaker 1: So this is a you know, high speed, high growth economy. 263 00:13:53,280 --> 00:13:55,920 Speaker 1: Would we have grown faster had interest rates been two 264 00:13:55,920 --> 00:13:58,319 Speaker 1: percent instead of five percent? The answer is, of course. 265 00:13:58,760 --> 00:14:01,880 Speaker 1: But I think even with five or six percent intertit 266 00:14:02,000 --> 00:14:06,280 Speaker 1: environment that we now see or predict will still continue 267 00:14:06,280 --> 00:14:10,760 Speaker 1: to grow. There are pockets where affordability it becomes an issue. 268 00:14:11,520 --> 00:14:16,800 Speaker 1: We see a decline in some of the mortgage business 269 00:14:16,880 --> 00:14:21,520 Speaker 1: for obvious reasons, but in general, I think, yeah, we could. 270 00:14:21,960 --> 00:14:23,880 Speaker 1: We could have done probably one or two percent more 271 00:14:23,920 --> 00:14:27,560 Speaker 1: growth in the economy, saying, you know, because of higher 272 00:14:27,600 --> 00:14:29,800 Speaker 1: interest rates, that drags you down, but we're still going 273 00:14:29,840 --> 00:14:33,080 Speaker 1: to be seeing some great economic growth. I'm very excited 274 00:14:33,120 --> 00:14:34,480 Speaker 1: about this year. I want to get to some of 275 00:14:34,520 --> 00:14:37,280 Speaker 1: your big bets abroad, and let's start off with credit suites, 276 00:14:37,280 --> 00:14:40,800 Speaker 1: because that went the other direction quite a bit negative 277 00:14:41,360 --> 00:14:44,120 Speaker 1: over the last few weeks. A lot of questions being asked. 278 00:14:44,360 --> 00:14:48,600 Speaker 1: I'm wondering whether you would be open to assisting further 279 00:14:49,120 --> 00:14:52,440 Speaker 1: if there was another call for additional liquidity from credit suites. 280 00:14:52,600 --> 00:14:56,720 Speaker 1: The answer is absolutely not, for many reasons outside the 281 00:14:56,920 --> 00:15:00,800 Speaker 1: simplest reason, which is regulatory and statutory. We now own 282 00:15:01,480 --> 00:15:03,560 Speaker 1: um nine point eight percent of the bank. If we 283 00:15:03,600 --> 00:15:06,800 Speaker 1: go above ten percent, all kinds of new rules kick in, 284 00:15:07,080 --> 00:15:10,360 Speaker 1: whether it be by our regulator or the European regulator 285 00:15:10,440 --> 00:15:13,120 Speaker 1: or this was regulator. And we're not inclined to get 286 00:15:13,160 --> 00:15:16,200 Speaker 1: into a new regulatory regime. So I can cite five 287 00:15:16,320 --> 00:15:19,880 Speaker 1: six other reasons, but one reason, which is, you know, 288 00:15:20,120 --> 00:15:22,840 Speaker 1: there is a glass ceiling and we do not intend 289 00:15:22,840 --> 00:15:26,080 Speaker 1: to entertain going beyond it. And we're there now. I'm 290 00:15:26,080 --> 00:15:30,520 Speaker 1: wondering whether any conversations have taken place about other turnaround options. 291 00:15:30,560 --> 00:15:34,440 Speaker 1: Maybe some new radical ideas are needed to help revive 292 00:15:34,560 --> 00:15:37,360 Speaker 1: confidence in credit suites. What are you what is your 293 00:15:37,360 --> 00:15:41,240 Speaker 1: thinking there? That's uh, you're better off asking credit suite. 294 00:15:41,480 --> 00:15:43,920 Speaker 1: We're you know, we don't have a board seat. We're 295 00:15:43,960 --> 00:15:47,240 Speaker 1: an investor, um, and so we don't engage with them 296 00:15:47,280 --> 00:15:51,840 Speaker 1: and discussions that um, you know that kind of cross 297 00:15:51,840 --> 00:15:56,200 Speaker 1: fences us. UM. So the franchise credit Suites First Boston, 298 00:15:56,240 --> 00:15:59,320 Speaker 1: that's also not an option, not not something you would 299 00:15:59,360 --> 00:16:02,080 Speaker 1: invest We're looking at it Forday, Yeah, no, we're not 300 00:16:02,120 --> 00:16:05,480 Speaker 1: looking at that. Saudi National Bank chairman Amar El Kaderi, 301 00:16:05,560 --> 00:16:09,520 Speaker 1: speaking exclusively to Bloomberg on Wednesday, those remarks helping spark 302 00:16:09,600 --> 00:16:12,680 Speaker 1: the biggest ever slump in Credit Sueices stock on Wednesday, 303 00:16:12,880 --> 00:16:15,480 Speaker 1: prompting the Swiss authorities to issue a show of support 304 00:16:15,840 --> 00:16:19,160 Speaker 1: and a credit line of up to fifty four billion dollars. 305 00:16:19,600 --> 00:16:22,320 Speaker 1: After becoming engulfed in the turbulence set off by Silicon 306 00:16:22,400 --> 00:16:25,600 Speaker 1: Valley banks collapse, Credit Sueices stock embarked on its initial 307 00:16:25,640 --> 00:16:29,240 Speaker 1: plunge just as the European Central Banks Governing Council convened 308 00:16:29,280 --> 00:16:32,200 Speaker 1: for its two day gathering, raising concerns about the health 309 00:16:32,280 --> 00:16:35,920 Speaker 1: of the wider banking industry. Asked whether the latest uproar 310 00:16:35,960 --> 00:16:39,080 Speaker 1: could bring a repeat of the last global financial crisis, 311 00:16:39,320 --> 00:16:42,520 Speaker 1: ECB president Christine Lagarde said, I was a run in 312 00:16:42,560 --> 00:16:44,880 Speaker 1: two thousand and eight, so I'll have clear recollection of 313 00:16:45,000 --> 00:16:49,280 Speaker 1: what happened and what we had to do. We did 314 00:16:49,360 --> 00:16:54,160 Speaker 1: reform the framework, we did agree on Buzzle three. We 315 00:16:54,240 --> 00:16:58,720 Speaker 1: did increase the capital ratio, we did increase the financial 316 00:16:58,800 --> 00:17:01,240 Speaker 1: coverage ratio as well, and I think that the banking 317 00:17:01,280 --> 00:17:04,600 Speaker 1: sector is currently in a much much stronger position than 318 00:17:04,640 --> 00:17:07,280 Speaker 1: where it was back in two thousand and eight. Despite 319 00:17:07,280 --> 00:17:10,119 Speaker 1: the market turmoil, the ECB went ahead with a planned 320 00:17:10,200 --> 00:17:14,080 Speaker 1: half point increase in interest rates, but offered few clues 321 00:17:14,160 --> 00:17:17,080 Speaker 1: on what may follow a mid market turmoil that royaled 322 00:17:17,240 --> 00:17:20,399 Speaker 1: credit suites. For more on the ECB's decision and the 323 00:17:20,480 --> 00:17:24,320 Speaker 1: challenges it's facing. Former ECB Chief economist Peter Prett joined 324 00:17:24,320 --> 00:17:27,840 Speaker 1: Bloomberg's Guy Johnson and Alex Steele. But so difficult is 325 00:17:27,840 --> 00:17:29,960 Speaker 1: that you have the liquidity issue of solving the issue, 326 00:17:30,160 --> 00:17:32,480 Speaker 1: and then the confidence issue. And in many ways it 327 00:17:32,480 --> 00:17:34,360 Speaker 1: feels like what's happening in the financial system that they're 328 00:17:34,400 --> 00:17:35,959 Speaker 1: here in the US or in Europe is very much 329 00:17:35,960 --> 00:17:40,120 Speaker 1: a confidence issue. Hadn't the ECB deal with that? Well, 330 00:17:40,560 --> 00:17:43,600 Speaker 1: that's that's a little bit their job, ECB and also 331 00:17:44,000 --> 00:17:47,359 Speaker 1: as a supervisor. I think what we have today is 332 00:17:47,600 --> 00:17:50,159 Speaker 1: big concerns about the in the markets belt you know, 333 00:17:50,200 --> 00:17:53,840 Speaker 1: who took positions you know, in interest rate risk. So 334 00:17:53,880 --> 00:17:57,159 Speaker 1: they look at the portfolio of bonds you know, in 335 00:17:57,200 --> 00:18:00,440 Speaker 1: banks or is it funding funded in all the From 336 00:18:00,480 --> 00:18:03,720 Speaker 1: what we know from from European banks is that the 337 00:18:03,880 --> 00:18:08,040 Speaker 1: risk of you know, interest rate positions is relatively small. 338 00:18:08,119 --> 00:18:10,800 Speaker 1: And this was repeated by the Ghindows, the vice president 339 00:18:10,840 --> 00:18:14,119 Speaker 1: today And I'm not so much concerned, you know about 340 00:18:15,320 --> 00:18:17,639 Speaker 1: interest rate risk in the banking book of the banks, 341 00:18:17,720 --> 00:18:19,760 Speaker 1: you know. I also think you know that most banks 342 00:18:19,760 --> 00:18:23,240 Speaker 1: are hedged, and the counterparties of the hedges are basically 343 00:18:23,280 --> 00:18:26,520 Speaker 1: pension funds and insurance companies. So I think this risk 344 00:18:26,640 --> 00:18:29,520 Speaker 1: is relatively under control. You never know, of course, but 345 00:18:29,560 --> 00:18:32,120 Speaker 1: I think it's not the main issue. The main issue 346 00:18:32,560 --> 00:18:35,520 Speaker 1: is a credit book for the tending that credit book 347 00:18:35,520 --> 00:18:39,280 Speaker 1: looks good, but banks get into trouble when the credit book, 348 00:18:39,280 --> 00:18:41,679 Speaker 1: you know, start to deteriorate, and I think this is 349 00:18:41,720 --> 00:18:43,960 Speaker 1: the risk we have to monitor in the future. It's 350 00:18:43,960 --> 00:18:46,440 Speaker 1: not so much the interest rate risk, but it's really 351 00:18:46,440 --> 00:18:48,399 Speaker 1: what happens in the credit book, and for that the 352 00:18:48,440 --> 00:18:51,760 Speaker 1: economy is absolutely key. For a central bank to provide 353 00:18:51,800 --> 00:18:54,639 Speaker 1: liquidity when you have good collateral is not an issue. 354 00:18:54,760 --> 00:18:57,600 Speaker 1: And basically that's the signal that the Swiss Central Bank 355 00:18:57,720 --> 00:19:02,080 Speaker 1: is is giving, basically saying, okay, I'm ready to provide 356 00:19:02,080 --> 00:19:04,760 Speaker 1: a lot of collaptional of liquidity because you have good 357 00:19:04,760 --> 00:19:07,960 Speaker 1: collapsual So I think that's not the main issue for 358 00:19:08,000 --> 00:19:10,600 Speaker 1: the time being. I know that the markets are concerned. 359 00:19:10,840 --> 00:19:13,360 Speaker 1: Markets have still the trauma of two thousand and eight, 360 00:19:13,760 --> 00:19:16,720 Speaker 1: but we live in a very different world today. I 361 00:19:16,760 --> 00:19:19,320 Speaker 1: was in two thousand in the eleven in the ECB 362 00:19:19,720 --> 00:19:22,679 Speaker 1: when we had, you know, the sovereign debt crisis, and 363 00:19:22,760 --> 00:19:26,320 Speaker 1: the information we got, you know, from the banking system 364 00:19:26,480 --> 00:19:29,560 Speaker 1: was absolutely scattered, you know, because supervision was still at 365 00:19:29,560 --> 00:19:33,560 Speaker 1: the national level. Now we have concentrated information, and so 366 00:19:33,600 --> 00:19:36,280 Speaker 1: that's a very big, very big difference, you know, compared 367 00:19:36,320 --> 00:19:39,080 Speaker 1: to two thousand and eight. They knew what's going on. 368 00:19:39,440 --> 00:19:42,920 Speaker 1: That's former ECB Chief Economist Peter Prett coming up from 369 00:19:42,960 --> 00:19:46,520 Speaker 1: Europe to Washington. We hear from top lawmakers on congressional 370 00:19:46,520 --> 00:19:49,800 Speaker 1: banking committees. You're listening to a special edition of Bloomberg 371 00:19:49,880 --> 00:19:52,639 Speaker 1: day Break Weekend. It's a look back at the historic 372 00:19:52,720 --> 00:19:55,560 Speaker 1: week in the markets and crisis in the banking sector. 373 00:19:55,920 --> 00:19:58,520 Speaker 1: This program was recorded on Friday. If you're looking for 374 00:19:58,560 --> 00:20:01,280 Speaker 1: the latest developments on this story, make sure to stay 375 00:20:01,280 --> 00:20:03,880 Speaker 1: tuned to our news updates twice an hour all weekend 376 00:20:03,920 --> 00:20:18,080 Speaker 1: long on Bloomberg Radio. This is Bloomberg Daybreak Weekend. I'm 377 00:20:18,119 --> 00:20:20,800 Speaker 1: Tom Busby. This week a special edition of the show. 378 00:20:21,160 --> 00:20:24,040 Speaker 1: It's been an historic week in financial markets, marked by 379 00:20:24,080 --> 00:20:27,800 Speaker 1: crisis in the banking industry. The meltdown of Silicon Valley 380 00:20:27,800 --> 00:20:31,480 Speaker 1: Bank spread across the sector, touching signature bank, First Republic 381 00:20:31,520 --> 00:20:34,680 Speaker 1: and eventually credit suis It's a story that played out 382 00:20:34,760 --> 00:20:37,960 Speaker 1: right here on Bloomberg in exclusive interviews that move shares 383 00:20:38,000 --> 00:20:40,679 Speaker 1: of credit suits throughout the week. On this show, we 384 00:20:40,840 --> 00:20:44,199 Speaker 1: usually look forward, but today we're looking back, covering the 385 00:20:44,200 --> 00:20:46,360 Speaker 1: timeline of events that got us to where we are 386 00:20:46,440 --> 00:20:49,480 Speaker 1: right now. Full disclosure, we're taping this program on Friday, 387 00:20:49,640 --> 00:20:52,560 Speaker 1: so it's decidedly a look back, not a view of 388 00:20:52,560 --> 00:20:55,159 Speaker 1: what's to come. But stay tuned to our news updates 389 00:20:55,160 --> 00:20:58,240 Speaker 1: every thirty minutes throughout the weekend for the latest developments. 390 00:20:58,960 --> 00:21:02,199 Speaker 1: On Monday, President Biden came out before the markets opened 391 00:21:02,400 --> 00:21:06,080 Speaker 1: to try to calm a worried nation. All customers who 392 00:21:06,080 --> 00:21:08,760 Speaker 1: had deposits in these banks can rest assured. I want 393 00:21:08,760 --> 00:21:12,120 Speaker 1: to rest assured they'll be protected and they'll have access 394 00:21:12,160 --> 00:21:16,400 Speaker 1: to their money as of today, that includes small businesses 395 00:21:16,440 --> 00:21:19,760 Speaker 1: across the country that bank there and need to make payroll, 396 00:21:20,160 --> 00:21:23,040 Speaker 1: pay their bills, and stay open for business. The President 397 00:21:23,119 --> 00:21:25,760 Speaker 1: adding that he's going to ask Congress and regulators to 398 00:21:25,800 --> 00:21:30,359 Speaker 1: strengthen the rules for banks. On Thursday, Treasury Secretary Janet 399 00:21:30,400 --> 00:21:33,240 Speaker 1: Yellen said that her department is monitoring for a potential 400 00:21:33,280 --> 00:21:36,639 Speaker 1: contraction in credit in the US following the collapse of 401 00:21:36,640 --> 00:21:40,680 Speaker 1: Silicon Valley Bank would spark the danger of contagion across 402 00:21:40,720 --> 00:21:43,719 Speaker 1: the banking system. I can reassure the members of the 403 00:21:43,720 --> 00:21:47,880 Speaker 1: Committee that our banking system is sound and that Americans 404 00:21:48,000 --> 00:21:51,680 Speaker 1: can feel confident that their deposits will be there when 405 00:21:51,760 --> 00:21:54,720 Speaker 1: they need them. Speaking at a Senate Finance Committee hearing, 406 00:21:54,760 --> 00:21:57,800 Speaker 1: Yellen told lawmakers that she had first heard of problems 407 00:21:57,800 --> 00:22:00,520 Speaker 1: with SVB just one day before it was put into 408 00:22:00,520 --> 00:22:04,760 Speaker 1: Federal Deposit Insurance Corps receivership last Friday. Noting the bank's 409 00:22:04,800 --> 00:22:08,520 Speaker 1: high reliance on uninsured deposits for funding, she said, we 410 00:22:08,640 --> 00:22:12,880 Speaker 1: worked with the Federal Reserve and FDIC to protect all 411 00:22:13,000 --> 00:22:17,760 Speaker 1: depositors of the two field banks. On Monday morning, customers 412 00:22:17,800 --> 00:22:20,720 Speaker 1: were able to access all of the money in their 413 00:22:20,760 --> 00:22:24,919 Speaker 1: deposit accounts so they could make payroll and pay the bills. 414 00:22:25,200 --> 00:22:28,320 Speaker 1: The hearing comes amid market worries over financial stability and 415 00:22:28,400 --> 00:22:31,679 Speaker 1: the rapid fire collapse of three regional US banks and 416 00:22:31,760 --> 00:22:35,199 Speaker 1: troubles at credit suites. The Treasury backing a new Federal 417 00:22:35,200 --> 00:22:38,600 Speaker 1: Reserve facility to offer troubled banks liquidity in return for 418 00:22:38,680 --> 00:22:43,080 Speaker 1: high quality assets, aiming to halt any further runs on deposits. 419 00:22:43,440 --> 00:22:46,439 Speaker 1: As to what US regulators can and can't do when 420 00:22:46,480 --> 00:22:49,160 Speaker 1: it comes to banks, Bloomberg spoke with lawmakers on both 421 00:22:49,160 --> 00:22:51,960 Speaker 1: sides of the aisle to get their take first up, 422 00:22:52,040 --> 00:22:55,480 Speaker 1: Democratic Senator Shared Brown of Ohio. He's the chairman of 423 00:22:55,480 --> 00:22:57,960 Speaker 1: the Senate Banking Committee, and he spoke with Bloomberg's Joe 424 00:22:57,960 --> 00:23:02,080 Speaker 1: Matthew and Anne Marie Hordern on Tuesday. Brown wants regulators 425 00:23:02,080 --> 00:23:05,520 Speaker 1: to conduct a comprehensive review of the failures, urging them 426 00:23:05,520 --> 00:23:08,359 Speaker 1: to identify and act on any broader vulnerabilities in the 427 00:23:08,400 --> 00:23:11,040 Speaker 1: banking system. Well, I think we look at everything and 428 00:23:11,720 --> 00:23:15,159 Speaker 1: we're going to investigate through the Banking Housing Committee that 429 00:23:15,240 --> 00:23:18,919 Speaker 1: I share, we're following what the regulators are doing with 430 00:23:19,000 --> 00:23:22,080 Speaker 1: oversight to make sure they investigate. I don't think we 431 00:23:22,160 --> 00:23:24,960 Speaker 1: know yet, but what we do know is every time 432 00:23:25,720 --> 00:23:29,680 Speaker 1: the Silicon Valley bank and the bankers so often come 433 00:23:29,720 --> 00:23:33,439 Speaker 1: to Congress to weaken rules, too often, Congress goes along. 434 00:23:33,520 --> 00:23:37,000 Speaker 1: And whatever we do here, we're going to strengthen oversight rules. 435 00:23:37,040 --> 00:23:40,200 Speaker 1: We're going to make sure that the banks can't can't 436 00:23:40,240 --> 00:23:43,240 Speaker 1: play with risk the way they do and always make 437 00:23:43,280 --> 00:23:46,800 Speaker 1: working families in Ohio pay when when I first when 438 00:23:47,080 --> 00:23:49,840 Speaker 1: the story broke with what had happened in California, and 439 00:23:49,880 --> 00:23:53,080 Speaker 1: I knew that the CEO in California and lobbied Congress 440 00:23:53,080 --> 00:23:55,879 Speaker 1: and lobbied as friends and the regulators for weaker rules. 441 00:23:56,040 --> 00:23:58,720 Speaker 1: First thing I thought about was what happened in East Palestine, 442 00:23:58,720 --> 00:24:02,439 Speaker 1: Ohio with the railroads. The railroads had lobbied Congress, had 443 00:24:02,480 --> 00:24:05,960 Speaker 1: lobby the Trump administration. I'd used their pr campaign to 444 00:24:06,040 --> 00:24:09,480 Speaker 1: weaken safety rules and to hurt the communities. And who 445 00:24:09,560 --> 00:24:13,639 Speaker 1: always pays, whether it's customers at banks pay, or whether 446 00:24:13,720 --> 00:24:17,560 Speaker 1: it's customer or whether it's people in places like Ke's Ballastine. 447 00:24:17,640 --> 00:24:20,240 Speaker 1: So I think it's all about corporate power in the end, 448 00:24:20,280 --> 00:24:23,440 Speaker 1: and as we look at deposit insurance and so many 449 00:24:23,480 --> 00:24:25,919 Speaker 1: other things, we have to keep that in mind. I 450 00:24:25,960 --> 00:24:27,680 Speaker 1: thought you're going to say that it brought you back 451 00:24:27,720 --> 00:24:30,480 Speaker 1: to twenty eighteen when portions of Dodd Frank were rolled back. 452 00:24:30,520 --> 00:24:32,760 Speaker 1: I know you didn't love that idea then. And as 453 00:24:32,760 --> 00:24:36,040 Speaker 1: the President asks to strengthen regulations now, Senator, I wonder 454 00:24:36,320 --> 00:24:38,560 Speaker 1: what it is specifically that your committee can do to 455 00:24:38,640 --> 00:24:43,199 Speaker 1: prevent another SVB. Well, I hope my committee can do 456 00:24:43,240 --> 00:24:46,200 Speaker 1: it because we have so many people in this committee 457 00:24:46,200 --> 00:24:49,719 Speaker 1: that are at the beck and call of the banking lobby, 458 00:24:49,800 --> 00:24:53,800 Speaker 1: the financial services in particularly Wall Street, and particularly the 459 00:24:53,840 --> 00:24:57,240 Speaker 1: most powerful banks. But I know what this committee did 460 00:24:57,280 --> 00:24:59,840 Speaker 1: wrong a few years ago in passing this, and then 461 00:25:00,119 --> 00:25:03,720 Speaker 1: President Trump made it worse by weakening the standards even further. 462 00:25:03,840 --> 00:25:07,200 Speaker 1: But we clearly need stronger capital standards, We clearly need 463 00:25:07,280 --> 00:25:11,360 Speaker 1: stronger liquidity standards. We clearly need to do the strengthen 464 00:25:11,400 --> 00:25:15,000 Speaker 1: the stress tests. I am pushing the Federal Reserve to 465 00:25:15,080 --> 00:25:17,960 Speaker 1: do that. Now I'm going to push Congress to do that. 466 00:25:18,080 --> 00:25:21,320 Speaker 1: I'm less hopeful that Congress will do that because I've 467 00:25:21,359 --> 00:25:24,199 Speaker 1: seen the influence of the bank lobby in Wall Street 468 00:25:24,240 --> 00:25:27,439 Speaker 1: and in the end, again, Ohio workers always pay for 469 00:25:27,480 --> 00:25:30,560 Speaker 1: this when they get their way. That Senator Shared Brown, 470 00:25:30,720 --> 00:25:33,719 Speaker 1: Democrat from Ohio, for a view from the other side. 471 00:25:33,880 --> 00:25:36,720 Speaker 1: On Thursday, Bloomberg, Joe Matthew, and Anne Marie Horder and 472 00:25:36,760 --> 00:25:40,399 Speaker 1: spoke with Representative Patrick McHenry of North Carolina. He's the 473 00:25:40,440 --> 00:25:44,040 Speaker 1: chairman of the House Financial Services Committee. Mckenry said people 474 00:25:44,040 --> 00:25:46,760 Speaker 1: should hold off on a signing blame while Congress and 475 00:25:46,880 --> 00:25:50,080 Speaker 1: watch dogs investigate the cause of the bank's failure. Everybody's 476 00:25:50,200 --> 00:25:56,280 Speaker 1: preaching their book and so, but that's not my responsibility. 477 00:25:56,320 --> 00:25:58,520 Speaker 1: My responsibilities to get to the bottom of what happened 478 00:25:59,400 --> 00:26:03,040 Speaker 1: and why, and that's my obligation as a committee chair 479 00:26:03,280 --> 00:26:07,879 Speaker 1: and to look into this matter and understand what we 480 00:26:07,920 --> 00:26:09,959 Speaker 1: know at this point is you have a couple of 481 00:26:10,000 --> 00:26:14,320 Speaker 1: theories of the case. One mismanagement. Obviously the firm failed 482 00:26:15,520 --> 00:26:19,840 Speaker 1: to supervision right, whether or not those that were tasked 483 00:26:19,840 --> 00:26:23,040 Speaker 1: with overseeing the bank in the regulatory sphere did the 484 00:26:23,119 --> 00:26:28,720 Speaker 1: right thing. Third regulation, fourth law, and then fifth is 485 00:26:28,760 --> 00:26:33,000 Speaker 1: this macro question about the economy, the fiscal house that 486 00:26:33,359 --> 00:26:37,320 Speaker 1: inflamed inflation, and then the FED response to it in 487 00:26:37,400 --> 00:26:40,080 Speaker 1: the rapid rising rates. So you have five buckets of 488 00:26:40,119 --> 00:26:42,840 Speaker 1: theories at this point, and everyone has jumped to their 489 00:26:42,920 --> 00:26:46,240 Speaker 1: natural conclusion to give the answer. Here, we have to 490 00:26:46,280 --> 00:26:52,040 Speaker 1: first figure out why this happened and determine in a 491 00:26:52,200 --> 00:26:56,200 Speaker 1: really quantitative and qualitative way what happened. So you can't 492 00:26:56,200 --> 00:26:59,320 Speaker 1: tell us now if the bill paston twenty eighteen in 493 00:26:59,359 --> 00:27:01,879 Speaker 1: fact was partly to blame, or maybe a better way 494 00:27:01,880 --> 00:27:04,360 Speaker 1: to say is the original Dodd Frank would not have 495 00:27:04,359 --> 00:27:07,479 Speaker 1: prevented this from happening. Well, the original Dodd Frank, and 496 00:27:07,520 --> 00:27:11,119 Speaker 1: then the updates twenty one fifty five, the pie Parson 497 00:27:11,200 --> 00:27:17,159 Speaker 1: Bill that passed in twenty eighteen. The theory is among 498 00:27:17,320 --> 00:27:21,600 Speaker 1: some is that that changed in such a substantial way 499 00:27:21,720 --> 00:27:24,399 Speaker 1: Dodd Frank that they could have seen it under the 500 00:27:24,400 --> 00:27:27,560 Speaker 1: original law but didn't see it because of the the regulatory change. 501 00:27:28,080 --> 00:27:30,640 Speaker 1: The first studies of this, and the indication from bank 502 00:27:30,680 --> 00:27:33,720 Speaker 1: analysts is that that's not the case. The liquidity cover 503 00:27:33,840 --> 00:27:37,840 Speaker 1: ratio this bank would have passed if it had been 504 00:27:37,920 --> 00:27:43,360 Speaker 1: applied to them, and so the key provisions that change 505 00:27:43,560 --> 00:27:48,840 Speaker 1: would not have affected the supervision of this bank nor 506 00:27:49,040 --> 00:27:52,479 Speaker 1: their performance in this moment of stress in this bank run. So, 507 00:27:52,560 --> 00:27:54,440 Speaker 1: but that's the initial review of it. We want to 508 00:27:54,520 --> 00:27:57,080 Speaker 1: understand that that's in fact true in the case when 509 00:27:57,080 --> 00:27:59,919 Speaker 1: you look at the supervision, does this fall into the 510 00:28:00,040 --> 00:28:02,840 Speaker 1: her view of the FED in Washington or is this 511 00:28:02,960 --> 00:28:07,919 Speaker 1: the supervisors in San Francisco who was potentially asleep at 512 00:28:07,920 --> 00:28:10,679 Speaker 1: the wheel. To get to the bottom of that as well, 513 00:28:11,520 --> 00:28:14,600 Speaker 1: the way the FED is organized those through regional banks, 514 00:28:14,600 --> 00:28:18,199 Speaker 1: and the regional banks have their regional bank supervision and 515 00:28:18,280 --> 00:28:21,520 Speaker 1: examination process, we want to understand what happened in the 516 00:28:21,520 --> 00:28:24,879 Speaker 1: San Francisco Field Office and those that were in the bank. 517 00:28:25,200 --> 00:28:26,640 Speaker 1: So I have to get to the bottom of that 518 00:28:26,720 --> 00:28:29,600 Speaker 1: as well. Is this a Washington FED problem? Is that 519 00:28:29,680 --> 00:28:32,919 Speaker 1: San Francisco FED problem? Is that a failure of a 520 00:28:33,000 --> 00:28:35,600 Speaker 1: regulator or not? And at this stage of the game, 521 00:28:35,680 --> 00:28:38,040 Speaker 1: when you want to cast blame, it is natural. The 522 00:28:38,120 --> 00:28:40,600 Speaker 1: first order of business in any business failure is to 523 00:28:40,600 --> 00:28:43,640 Speaker 1: blame the management, because obviously the business failed. The second 524 00:28:43,760 --> 00:28:47,760 Speaker 1: is those that oversee the bank. But when people jump 525 00:28:47,800 --> 00:28:50,080 Speaker 1: to these conclusions at this stage of the game, a 526 00:28:50,160 --> 00:28:57,040 Speaker 1: week end on this really stressed moment for our banking system, 527 00:28:57,360 --> 00:29:02,080 Speaker 1: I think it's unhelpful and quite politically hackish to jump 528 00:29:02,160 --> 00:29:04,960 Speaker 1: to this political conclusion when we don't actually have the 529 00:29:04,960 --> 00:29:06,840 Speaker 1: full set of facts yet. But should the FED be 530 00:29:06,920 --> 00:29:10,680 Speaker 1: investigating themselves? This is almost the third scandal under the FED. 531 00:29:10,720 --> 00:29:13,440 Speaker 1: There's a trading, there's a Kansas City the rare master's 532 00:29:13,480 --> 00:29:16,959 Speaker 1: account for the fintech firm, and now there's this and 533 00:29:16,960 --> 00:29:20,640 Speaker 1: the Vice Chair Supervision, Michael Barr, will be investigating his 534 00:29:20,720 --> 00:29:24,520 Speaker 1: own FED. Why not have an outside probe? Well, Congress 535 00:29:24,520 --> 00:29:27,720 Speaker 1: will look into this as we should. We created the 536 00:29:27,720 --> 00:29:29,920 Speaker 1: Federal Reserve, we created you be in favor of that, 537 00:29:30,000 --> 00:29:34,240 Speaker 1: Like what Elizabeth Warren says, like an outside investigator. Everyone 538 00:29:34,360 --> 00:29:37,280 Speaker 1: in Washington wants to look around for an unbiased source 539 00:29:37,320 --> 00:29:42,240 Speaker 1: of information. Right, good luck. Everybody has a perspective. We 540 00:29:42,280 --> 00:29:45,720 Speaker 1: will certainly investigate this on Capitol Hill, and my committee 541 00:29:45,760 --> 00:29:49,000 Speaker 1: will look into this. That's Republican Congressman Patrick mckenry of 542 00:29:49,080 --> 00:29:52,520 Speaker 1: North Carolina. You're listening to a special edition of Bloomberg 543 00:29:52,560 --> 00:29:55,360 Speaker 1: Daybreak Weekend. It's a look back at the historic week 544 00:29:55,360 --> 00:29:59,040 Speaker 1: in the markets and crisis in the banking sector. Up next, 545 00:29:59,120 --> 00:30:01,960 Speaker 1: we look back by looking ahead, and get a preview 546 00:30:02,040 --> 00:30:05,000 Speaker 1: into what we can expect from the FED meeting this week. 547 00:30:05,160 --> 00:30:07,720 Speaker 1: This program was recorded on Friday. If you're looking for 548 00:30:07,760 --> 00:30:10,000 Speaker 1: the latest developments on this story, make sure to stay 549 00:30:10,040 --> 00:30:12,800 Speaker 1: tuned to our news updates twice an hour all weekend 550 00:30:12,920 --> 00:30:26,720 Speaker 1: long on Bloomberg Radio. This is Bloomberg Daybreak Weekend. I'm 551 00:30:26,800 --> 00:30:29,840 Speaker 1: Tom Busby. This week a special edition of the show. 552 00:30:30,040 --> 00:30:32,959 Speaker 1: It's been a historic week in financial markets, marked by 553 00:30:33,000 --> 00:30:36,520 Speaker 1: crisis in the banking industry. The meltdown of Silicon Valley 554 00:30:36,520 --> 00:30:40,280 Speaker 1: Bank spread across the sector, touching Signature Bank, First Republic, 555 00:30:40,320 --> 00:30:43,560 Speaker 1: and eventually credit suits. It's a story that played out 556 00:30:43,640 --> 00:30:47,160 Speaker 1: right here on Bloomberg in exclusive interviews that move shares 557 00:30:47,160 --> 00:30:49,920 Speaker 1: of credit suites throughout the week. We've been looking back 558 00:30:50,040 --> 00:30:52,560 Speaker 1: on the week all hour, but now it's time to 559 00:30:52,600 --> 00:30:55,960 Speaker 1: look forward. Full disclosure, we're taping this program on Friday 560 00:30:56,000 --> 00:30:58,400 Speaker 1: for the latest on the bank crisis. Stay tuned to 561 00:30:58,440 --> 00:31:01,080 Speaker 1: our news updates every thirty minute. It's throughout the weekend 562 00:31:01,320 --> 00:31:05,240 Speaker 1: for the latest developments. And most economists surveyed by Bloomberg 563 00:31:05,280 --> 00:31:08,120 Speaker 1: News narrowly expect the Federal Reserve to hike rates next 564 00:31:08,120 --> 00:31:11,840 Speaker 1: week and nudge its peak interest rate up slightly in 565 00:31:11,880 --> 00:31:15,400 Speaker 1: a continuing response to high inflation, despite concerns that a 566 00:31:15,440 --> 00:31:19,600 Speaker 1: banking crisis could have broader economic impact. Speaking with Bloomberg's 567 00:31:19,640 --> 00:31:22,800 Speaker 1: David Weston, former Treasury Secretary Larry Summers said the Fed 568 00:31:23,120 --> 00:31:26,760 Speaker 1: shouldn't be spooked into easing its campaign to contain inflation 569 00:31:27,120 --> 00:31:30,080 Speaker 1: out of excessive concern about a credit crunch in the 570 00:31:30,120 --> 00:31:32,840 Speaker 1: wake of the recent banking turmoil. I think we can 571 00:31:33,120 --> 00:31:42,160 Speaker 1: use policy directed at standing behind depositors, separately from monetary policy, 572 00:31:42,760 --> 00:31:46,720 Speaker 1: and I think it's appropriate at least on current facts, 573 00:31:46,720 --> 00:31:49,800 Speaker 1: and they're changing very quickly these days, but on current 574 00:31:49,840 --> 00:31:57,040 Speaker 1: facts to raise rates by twenty five basis points, so 575 00:31:57,480 --> 00:32:01,960 Speaker 1: that's where I would be coming down. I do think 576 00:32:02,000 --> 00:32:07,000 Speaker 1: that the FED should not allow financial dominance, but does 577 00:32:07,040 --> 00:32:11,680 Speaker 1: of course need to recognize that slower credit is going 578 00:32:11,760 --> 00:32:14,440 Speaker 1: to be the result of that. For what we can 579 00:32:14,480 --> 00:32:17,240 Speaker 1: expect next week, we turned out of Bloomberg's Michael McKee, 580 00:32:17,240 --> 00:32:21,320 Speaker 1: Bloomberg News International Economics and Policy correspondent, Michael, thanks for 581 00:32:21,400 --> 00:32:23,400 Speaker 1: being here. I wish I could give you an idea 582 00:32:23,400 --> 00:32:26,120 Speaker 1: of what's going to happen next week, but on a 583 00:32:26,200 --> 00:32:28,200 Speaker 1: day to day basis, I don't know what's happening by 584 00:32:28,240 --> 00:32:30,560 Speaker 1: the end of the day. We do know that on 585 00:32:30,720 --> 00:32:35,200 Speaker 1: the calendar there's a FED meeting on Wednesday and that 586 00:32:35,560 --> 00:32:37,680 Speaker 1: they have to make an interest rate decision. They'll also 587 00:32:37,920 --> 00:32:41,840 Speaker 1: put out new summary of their economic forecasts, and we 588 00:32:41,880 --> 00:32:45,040 Speaker 1: get the infamous dot plot update. So there is a 589 00:32:45,040 --> 00:32:46,680 Speaker 1: lot of news coming. We just don't know what it's 590 00:32:46,720 --> 00:32:49,400 Speaker 1: going to be. The general consensus on Wall Street after 591 00:32:49,440 --> 00:32:52,960 Speaker 1: everything that has happened is, if we get to Wednesday 592 00:32:53,120 --> 00:32:57,160 Speaker 1: and the banking sector has stabilized a little bit and 593 00:32:57,240 --> 00:33:00,480 Speaker 1: we're not going hour by hour, will somebody survive or not? 594 00:33:01,040 --> 00:33:03,760 Speaker 1: That the FED will raise interest rates by twenty five 595 00:33:03,760 --> 00:33:08,080 Speaker 1: basis points. Japal had suggested two weeks ago that we 596 00:33:08,160 --> 00:33:11,120 Speaker 1: might see them do fifty if the data were strong. 597 00:33:11,600 --> 00:33:14,160 Speaker 1: Data weren't all that strong. They were still good, but 598 00:33:14,320 --> 00:33:16,880 Speaker 1: they weren't all that strong, and with what's happened in 599 00:33:16,880 --> 00:33:21,640 Speaker 1: the banking system, probably a precautionary kind of move from 600 00:33:21,680 --> 00:33:24,520 Speaker 1: the FED, a risk management move of only twenty five 601 00:33:24,560 --> 00:33:27,520 Speaker 1: basis points is the most likely thing. Now, let's go 602 00:33:27,600 --> 00:33:29,800 Speaker 1: back to some of those data points that we saw, 603 00:33:29,960 --> 00:33:35,240 Speaker 1: because some very encouraging. The jobs numbers surprising to the upside. Also, 604 00:33:35,440 --> 00:33:38,760 Speaker 1: housing and housing very closely tied to the banking industry. 605 00:33:39,560 --> 00:33:41,760 Speaker 1: Everybody's kind of wondering about that, and it is an 606 00:33:41,840 --> 00:33:48,120 Speaker 1: unusual situation. Obviously, housing very influenced by mortgage rates, which 607 00:33:48,120 --> 00:33:50,920 Speaker 1: are influenced by the fed's rates. And mortgage rates have 608 00:33:50,920 --> 00:33:54,040 Speaker 1: gone way up, and we've seen housing sales drop a lot. 609 00:33:54,200 --> 00:33:57,520 Speaker 1: What we haven't seen is a drop in new home construction. 610 00:33:57,640 --> 00:33:59,920 Speaker 1: Some sales have fallen off, but we saw a big 611 00:34:00,160 --> 00:34:04,200 Speaker 1: rise in new home construction new home starts this past month, 612 00:34:04,320 --> 00:34:08,360 Speaker 1: and also building permits we're up thirteen point eight percent, 613 00:34:08,640 --> 00:34:12,200 Speaker 1: suggesting there's confidence among builders. We know there's a short 614 00:34:12,239 --> 00:34:16,359 Speaker 1: fall of housing. And we also have seen interest rates 615 00:34:16,400 --> 00:34:20,480 Speaker 1: for mortgages come down a little bit in recent weeks 616 00:34:20,719 --> 00:34:22,520 Speaker 1: because they're not just tied to the FED funds rate, 617 00:34:22,560 --> 00:34:25,000 Speaker 1: they're tied to what's happening in the markets. And we've 618 00:34:25,040 --> 00:34:28,879 Speaker 1: seen obviously interest rates fall across the Yeel curve over 619 00:34:28,920 --> 00:34:31,640 Speaker 1: the past couple of weeks as people worry about what's 620 00:34:31,640 --> 00:34:35,720 Speaker 1: going on in the world, and so that is maybe 621 00:34:35,800 --> 00:34:39,359 Speaker 1: in scenting the builders to think that people might come 622 00:34:39,400 --> 00:34:42,520 Speaker 1: back out and start buying again. Michael, thank you so much. 623 00:34:42,719 --> 00:34:45,279 Speaker 1: Be sure to tune into Bloomberg on Wednesday at one 624 00:34:45,440 --> 00:34:49,480 Speaker 1: thirty Wall Street time for our simulcast special The Fed Decides. 625 00:34:50,320 --> 00:34:53,480 Speaker 1: And that's been a special edition of Bloomberg Daybreak. Weekend, 626 00:34:53,480 --> 00:34:55,720 Speaker 1: our looked back at an historic week in the markets 627 00:34:55,719 --> 00:34:58,680 Speaker 1: and crisis in the banking sector. I'm Tom Busby. This 628 00:34:58,760 --> 00:35:01,640 Speaker 1: program was recorded on If you're looking for the latest 629 00:35:01,640 --> 00:35:04,239 Speaker 1: developments on this story, make sure to stay tuned to 630 00:35:04,320 --> 00:35:07,279 Speaker 1: our top stories and global headlines starting right now.