Key events
Roubini: Credit Suisse crisis is a ‘Lehman moment’
The high-profile economist Nouriel Roubini, known as Dr Doom, said that a collapse of Credit Suisse would be a “Lehman moment,” referring to the collapse of the US investment bank Lehman Brothers in August 2007 at the start of the global financial crisis. He tweeted:
As I pointed out in my Bloomberg TV interview this morning the Credit Suisse crisis is a “Lehman moment” for European and global markets. “Too big to fail and too big to be saved”. It is not even clear what their various unrealized losses on securities and other assets are.
— Nouriel Roubini (@Nouriel) March 15, 2023
‘Dr.Doom’ Nouriel Roubini on Bloomberg Surveillance saying that something bad happening to $CS could be ‘like a Lehman moment’.
Futures extend decline, S&P 500 down 1.9% pic.twitter.com/v7jzYxFW56— Streetinsider.com (@Street_Insider) March 15, 2023
Government asks for coal plants to run next winter
Alex Lawson
Ministers have asked National Grid to “explore” whether winter contracts to keep coal-fired power plants on standby could be repeated next year.
Last year, the Grid agreed contracts with Drax, EDF and Uniper to keep five coal units ready to step in if other sources of power generation ran short, with the possibility of Russia cutting gas supplies into Europe looming large.
The coal plants were asked to warm up several times over the winter, but only put into action to produce power once, during the cold snap last week.
But Drax, which has faced heavy criticism over its biomass business model, said its coal units would close as planned at the end of this month.
A spokesperson for the company said: “With two major maintenance outages planned on our biomass units this summer, and a number of certifications expiring on the coal-fired units, the units would not be able to operate compliantly for winter 2023.”
Britain has set a goal to stop generating electricity using coal by October 2024 in an effort to cut carbon emissions. In 2021, the target was pulled forward by a year.
National Grid’s electricity system operator said ahead of this winter that the coal contracts would cost between £220m to £420m upfront.
Jeremy Hunt: UK to avoid recession this year
Jeremy Hunt, started his budget speech by saying that the British economy “is proving the doubters wrong”.
He said the Office for Budget Responsibility now forecasts that the UK will not enter a technical recession this year.
You can read more here on our budget live blog with Andrew Sparrow and Graeme Wearden:
Over in parliament, chancellor Jeremy Hunt is starting to deliver the budget.
We’re live-blogging it all here:
Credit Suisse shares down 26%; chair says state aid ‘not a topic’ for the bank
Credit Suisse shares have tumbled further, by 26% to a new record low of 1.68 Swiss francs, as the selloff gathered pace.
The bank’s chairman, Axel Lehmann, said this morning that government assistance “isn’t a topic” for the lender as the scandal-hit Swiss bank seeks to shore up confidence among clients, shareholders and regulators, Bloomberg News reported.
Speaking at the Financial Sector Conference in Saudi Arabia, Lehmann said it wouldn’t be accurate to compare Credit Suisse’s current problems with the recent collapse of Silicon Valley Bank (SVB), particularly because the banks are regulated differently.
We have strong capital ratios, a strong balance sheet.
We already took the medicine,
he said, referring to the extensive restructuring programme announced in October, to turn it into “the new Credit Suisse”.
The volatility in the banking sector may deter central banks from raising interest rates higher.
The markets have cut the chances of a quarter-point rise in US interest rates next week, to around 50%, according to CME’s FedWatch Tool.
Another rise in UK interest rates next week, from 4% to 4.25%, is seen as a 53% chance, with a 47% chance that the Bank of England leaves rates on hold.
The banking rout has taken on “another ominous twist” today, says Susannah Streeter, head of money and markets at Hargreaves Lansdown:
The worry is that banks sitting on large unrealised losses in their bond portfolios might not have sufficient buffers if there is a fast withdrawal of deposits. Although the biggest players are judged not to be at risk, thanks to the chunky layer of capital they are sitting on and the stable nature of their deposits, the nervousness is palpable.
A game of whack a mole seems to be emerging, and problems are popping up elsewhere in the world. Investors seem to be waiting on words and action from the ECB, as so far policymakers have been quiet about what support there may be if the situation deteriorates further.’’
The ongoing troubles of Swiss banking giant Credit Suisse are dragging European markets lower on Wednesday, with US futures following suit, says Raffi Boyadjian, lead investment analyst at XM.
Boyadjian adds:
The plunge in Credit Suisse shares today is in response to the bank’s annual report yesterday where it admitted that there were “material weaknesses” in internal controls in financial reporting.
The news couldn’t have come at a worse time when the banking sector is already under pressure.
France’s finance ministry says it has no comment to make regarding sharp drops in the share prices of the country’s top banks, as a slump in the share price of Credit Suisse causes losses across Europe’s banking sector.
Trading in BNP Paribas was briefly halted this morning; its shares are down around 10% this morning, as are fellow French bank Société Générale.
Crédit Agricole are down 5.4%.
“Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse,” says Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
Franchini adds (via Reuters):
“This is dragging lower the whole banking sector in Europe.
The shares accelerated losses after the Saudis (commented) …I believe Credit Suisse’s crisis can be solved and the bank will not be let to go belly up.”.
Trading in Credit Suisse’s shares has been halted a number of times by the stock exchange operator today, as volumes soared and the stock plummeted 20%.
Credit Suisse Group’s Saudi backer did also say he was happy with the bank’s transformation plan and doesn’t think the Swiss lender will need extra money.
Reuters has the details:
Saudi National Bank’s (SNB) chairman Ammar Al Khudairy described Credit Suisse as an opportunistic investment and said the value realisation of that investment will unfold as the Swiss bank proves they are doing the turnaround.
“We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank,” Al Khudairy said on in an interview with Reuters.
“I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,” Al Khudairy said on the sidelines of a conference in Riyadh.
SNB’s investment objective is not dependent on time, and the Saudi bank will exit when proper value to the shares is acquired, he added.
