Former Goldman Sachs Group Inc GS CEO Lloyd Blankfein reportedly said that turmoil in the banking sector will likely impact economic growth as lenders become more conservative.
“The greater risk environment for financials leads to husbanding of capital and risk-taking, less and more conservative investing and lending, and inevitably, lower growth,” Blankfein told Reuters.
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Blankfein, who was chairman and CEO of Goldman Sachs from 2006 to 2018, navigated the bank through the global financial crisis of 2008 and its aftermath.
“While some banks have been hung up by poorly managed, concentrated risk, the overall banking system is extremely well capitalized and substantially more tightly regulated than in prior challenging times,” he said.
Unfolding Crisis: Blankfein's comments come in the backdrop of central banks across the globe announcing a coordinated action to boost liquidity and stop a potential contagion at a time when UBS Group AG UBS agreed to pay 3 billion Swiss francs ($3.25 billion) in stock to acquire Credit Suisse Group AG's CS.
Credit Suisse said on Sunday 16 billion Swiss francs ($17.24 billion) of its additional tier 1 debt, a type of bond, will be written down to zero on the orders of the Swiss regulator FINMA as part of its rescue merger.
S&P Global reportedly downgraded the credit ratings of First Republic Bank FRC deeper into junk status on Sunday and said the recent $30 billion deposit infusion from 11 big banks may not solve its liquidity issues.
Read Next: El-Erian Says Credit Suisse-UBS Deal ‘Not Clean’ But Best Of Available Options
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