Brady Dougan, who led Credit Suisse Group AG through the financial crisis, said higher interest rates pose one of the biggest threats to markets.
“We’ve all very much adjusted to the new normal of very low or negative interest rates,” Dougan, 55, said in an interview with Bloomberg Television’s Manus Cranny. “The pace and the impact of interest-rate changes, ultimately, I think, may be one of our bigger issues.”
The U.S.-born Dougan, a 25-year Credit Suisse veteran, will leave at the end of June after eight years as chief executive officer. He’ll be replaced by Tidjane Thiam, 52, the former CEO of Prudential Plc.
Central banks in the U.S. and Europe have held benchmark rates at record lows and flooded markets with cheap funds to encourage economic recovery. That drove bond yields below zero in some countries and bolstered stocks markets.
Even though everyone knows the U.S. Federal Reserve will raise benchmark rates sooner or later, “it’s going to be hard for people to adjust” when it happens, he said. A Fed increase this year is possible, but later is more likely, in Dougan’s estimation. The International Monetary Fund last week urged Fed Chairman Janet Yellen to wait until next year to preserve the strength of the U.S. economy.
The possibility that Britain will leave the European Union is also a risk that “every manager of a business has to take into account,” Dougan said. “There is no question about that. It wouldn’t be responsible not to.”
British Prime Minister David Cameron has pledged to hold a referendum on EU membership by the end of 2017.
The first American to serve as sole CEO of Credit Suisse, Dougan guided Switzerland’s second-largest bank through the meltdown that followed the collapse of Lehman Brothers Holdings Inc., without a government bailout. In recent years, he faced growing criticism from some investors for not following UBS Group AG by cutting the investment bank more aggressively.
Investment banking will keep evolving over the next decade in response to regulation, technology and changes in the structure of markets, Dougan said, and tougher rules will force more banks to exit business lines as profitability shrinks.