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Esteves, speaking at a BTG event in Santiago, Chile, said the volatility roiling global markets is a result of 15 years of complacency during near-zero interest rates that led to widespread excesses. People were caught off guard when rates suddenly spiked and didn’t have the real life experience on how to manage those risks, he said.
“It’s very basic asset liability management that any junior analyst working at a bank in Chile, Brazil or Colombia or any other country that presents a little more volatility would know,” Esteves said. “It was a gross mismanagement of your interest rates mismatch and any intern at BTG or Bank of Chile or any other great Chilean bank learned in the first three months of job that you shouldn’t do that —but apparently they didn’t learn.”
Esteves, 54, said he expects global interest rates to remain high for longer as bringing inflation back down toward 2% annually will be a difficult task. He criticized the US Federal Reserve’s flip-flopping on their messaging around monetary tightening, saying they need to stay the course even if it leads to recession.
“It means the plane is flying but the pilot is not necessarily driving it,” he said of the Fed.
“After 15 years of zero rates you have a whole generation of traders, portfolio managers, economists, analysts that don’t know these basic concepts,” he said. “They only know inflation by text book, people never saw a hawkish central bank or positive real rates, and so this is the dislocation that we’re dealing with.”
The banker said Credit Suisse Group AG’s downfall was an isolated event and that the “plan C” by regulators has managed to contain the fallout.“The other day a regulator asked me why Credit Suisse went bankrupt and I said ‘first slowly then suddenly,’” he said. “There were a number of signals over many years and then suddenly you can’t sustain that situation.”
Esteves, who owns about 25% of BTG, has a net worth of $5.4 billion, according to the Bloomberg Billionaire Index.
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