‘Dr Doom’ Nouriel Roubini Warns SVB Failure Poses Global Contagion Risk
- The collapse of Silicon Valley Bank could hit companies outside the US, Nouriel Roubini has warned.
- At least one big European bank faces the same financial problems as SVB, the ‘Dr. Doom’ economist said.
- Roubini spoke before worries about Credit Suisse sank its shares and revived fears about banks.
Nouriel Roubini, one of the economists who predicted the 2008 financial crash, has warned that Silicon Valley Bank’s failure poses a risk of global banking contagion and the fallout could hit companies beyond the US.
SVB was shut down and seized by US regulators on Sunday after a historic run on its deposits that crushed its finances. Roubini, aka Wall Street’s “Dr. Doom,” pointed to an institution at risk in Europe in his comments to Newsweek on Monday.
“There is at least one financial institution in Europe that has been historically undercapitalized, have had problems of recapitalizing, might have some bad assets, some exposures to long-term securities and unrealized losses,” Roubini said.
“If something were to happen with this institution … that will be much more systemically important — we’re speaking about institutions with trillions of dollars of assets, not $400 billion like SVB,” he said.
Roubini didn’t specify which institution he was talking about.
Others, like “Rich Dad Poor Dad” author Robert Kiyosaki, have flagged risks at Credit Suisse. The Swiss banking giant has been beset by problems since October, when concerns about its financial health fanned fears of another Lehman Brothers moment.
On Wednesday, worries about Credit Suisse revived after its biggest backer, the Saudi National Bank, ruled out investing any more in the bank. The lender’s shares plunged more than 20% in Zurich as investors’ concerns about stability in the banking sector reignited.
European stocks fell on Monday, when the pan-European Stoxx 600 index of stocks closed 2.3% lower as markets were rattled by SVB’s failure.
“That’s the natural lag of the global contagion,” said Roubini. “That’s why even in Europe, stocks are way down, even though they had nothing to do with this particular [collapse].”
European stocks recovered Tuesday as those fears abated, but are falling Wednesday as Credit Suisse’s plunge sours investor sentiment. The Stoxx 600 was down 2.6% at last check.
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