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The European Central Bank has reduced its main interest rate from 4 per cent to 3.75 per cent, becoming the second major economy this week to cut rates following Canada’s decision on Wednesday.
At a press conference held after the rate cut announcement yesterday, ECB president Christine Lagarde said the outlook for inflation has improved “markedly”, though she cautioned that inflation would stay above the ECB’s 2 per cent target “well into next year”, forecasting 2.5 per cent in 2024 and 2.2 per cent in 2025.
“Our confidence in the path ahead has been increasing over the last months,” she added. But she also warned that “a weaker world economy or an escalation in trade tensions between major economies would weigh on euro area growth”.
Moving forwards she confirmed the ECB was not “pre-committing to a particular rate path”.
The Bank of England is also widely expected by analysts to cut rates this month. UK inflation has fallen to 2.3 per cent from a peak of over 11 per cent in late 2022. Meanwhile, a poll of economists by Reuters indicates a 55 per cent chance of a US Federal Reserve rate cut in September.
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Credit Suisse bondholders are suing Switzerland following the write-down of $17bn in debt during the bank’s Swiss government-backed rescue by UBS last year.
As reported by the Financial Times, the lawsuit filed in the Southern District of New York seeks $82.2mn in damages, costs and interest for what the plaintiffs allege was an unlawful seizure of their property. The investors argue that their additional tier 1 bonds were unfairly written down, particularly as equity investors received $3.3bn in the deal.
Commenting on the matter, Dennis Hranitzky, a partner at legal firm Quinn Emanuel & Sullivan, which is representing the bondholders, said: “Switzerland abandoned its regulatory role for that of a private investment bank — prioritising national interests over its legal obligations.”
“Switzerland disregarded potential alternatives that could have protected the investments of AT1 bondholders in the interest of economic nationalism,” he added.
The lawsuit is part of a broader wave of legal claims exceeding $9bn across Europe and Asia, which initially targeted Swiss regulator Finma and are now extending to the Swiss government itself.
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Japan’s Securities and Exchange Surveillance Commission is considering recommending punitive measures against MUFG Bank and two securities firms under Mitsubishi UFJ Financial Group for allegedly sharing customer information without consent.
As reported by Nikkei, the SEC plans to investigate MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. The probe centres on unauthorised sharing of non-public information, including details of a 2021 merger between a Japanese materials maker and a foreign company.
Nikkei added that MUFG Bank is suspected of violating multiple laws, including suggesting preferential lending rates to potential clients which would be contingent on engaging with the group’s securities companies.
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Moody’s Ratings has announced that six US regional banks could face debt rating downgrades due to their significant exposure to commercial real estate loans. The banks under review are First Merchants Corporation, FNB Corporation, Fulton Financial Corporation, Old National Bancorp, Peapack-Gladstone Financial Corporation and WaFd Bank.
As reported by Bloomberg, Moody’s cited ongoing pressures on asset quality and profitability, exacerbated by sustained high interest rates, as reasons for the potential downgrades of regional banks with substantial concentrations in CRE loans.
