2023-05-09 20:34:26
The big boss of the National Bank expects the fight once morest inflation to continue for at least two more years.
“Inflation is likely to be a challenge once more in 2024 and 2025,” said Laurent Ferreira on Tuesday during an event bringing together more than 800 people from the business community at the Palais des congrès de Montréal.
Increasingly complex geopolitical tensions, the energy transition and the desire to reindustrialize are all, he points out, inflationary elements.
“It’s going to be expensive,” he said in an armchair conversation with Annick Guérard, president of Transat. This discussion with Annick Guérard was organized on the sidelines of a speech delivered by Laurent Ferreira at the invitation of the Canadian Club of Montreal.
“You have to be careful and have cushions,” says Laurent Ferreira.
I expect 5-year and 10-year interest rates to be higher within two years.
Laurent Ferreira, big boss of the National Bank
He notes that monetary policy is starting to take effect and calls the Bank of Canada’s recent decision to pause and not raise interest rates further for the time being “great news”.
“We don’t yet understand the full impact of rising interest rates. In the short term, watch the job market, mortgage renewals and commercial real estate refinances at new rates. You have to take the time to observe all of this. The costs will increase. »
Banking crisis
Laurent Ferreira is also stunned by developments in the financial sector outside the country. He started by talking regarding Credit Suisse, this European bank whose takeover by UBS was recently announced.
I did not expect to see such a large bank fall in my career. It’s still a surprise.
Laurent Ferreira, big boss of the National Bank
“Credit Suisse is an isolated case different from what is happening in the United States,” he said. Ten years of strategic errors and failures in risk management and grand ideas. It ended in a total loss of confidence on the part of shareholders. »
On the difficulties experienced by some relatively smaller US banks, the CEO of National Bank referred to a few main factors to explain the situation shaking the industry.
“There were regulatory errors, a failure in the supervision of certain banks. And also at the level of risk management. These were clearly not priorities in the management of these banks. »
When inflation began to bite at the start of last year, it became clear to him that central banks were going to raise rates aggressively.
So you had to put yourself in a defensive position, start doing calculations, check balance sheets, do stress tests and ask questions, he says.
“That’s what we did at the National Bank. But clearly, this was not the case in these banks, ”says Laurent Ferreira, pointing to American banks in distress.
He also talked regarding the need for a diversified business model. “If you finance only one sector, an accident will occur. The diversified model where you fund multiple industries and your funding comes from multiple sources is the right approach. »
Laurent Ferreira ended by saying that expertise in interest rate risk management and in navigating volatile markets should not be an option in a bank.
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