Dr Doom: Famed analyst says Credit Suisse crisis is a ‘Lehman moment’ for global markets
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Economist Nouriel Roubini, nicknamed Dr Doom after he predicted the 2008 sub-prime crisis, said the Credit Suisse crisis is potentially a “Lehman moment” for European and global markets.
In an interview with Bloomberg TV, Roubini said Credit Suisse is “too big to fail and too big to be saved”.
Whereas the collapse of Silicon Valley Bank had “ripple effects” across the financial sector, problems at Credit Suisse might be a “Lehman moment” for the sector.
“Anything that happens to Credit Suisse will be of systemic effect not just to the European financial system but also for the global financial system,” Roubini said.
Roubini is professor emeritus at Stern School of Business, New York University.
Shares in Credit Suisse lost over 30 per cent on Wednesday after the bank’s top shareholder, the Saudi National Bank, said it was not open to further capital injections.
The fall in Credit Suisse’s share price has sparked a banking rout across Europe with major lenders across the continent seeing steep falls in their share price. The Stoxx 600 banking index was down 6.8 per cent.
The sell-off comes just days after the collapse of Silicon Valley Bank sparked another major rout on Monday with markets remaining on high alert for further problems.
Eoin Walsh, portfolio manager at TwentyFour Asset Management said the “timing could scarcely be worse”, noting that Credit Suisse’s management are likely to find it “difficult to calm investors and deposit holders”.
While the bank is highly capitalised, this may do little to help if it faces severe stress.
As Walsh commented: “the bank has just reported a CET1 ratio of 14.1 per cent, so they are highly capitalised and their average liquidity ratio (LCR) was 150 percent in Q1 2023, but these stats seem somewhat meaningless in the situation they find themselves, which is about liquidity and confidence, or a lack thereof.“