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Where Cyprus Danger Lies: UBS Analyst

Monday, 18 Mar 2013 | 6:07 PM ET
Where the Cyprus Danger Lies: UBS Analyst
Monday, 18 Mar 2013 | 5:08 PM ET
Banking developments in Cyprus ratchet up the consequences for future crises, Paul Donovan of UBS says.

Banking developments in Cyprus ratchet up the consequences for future crises, Paul Donovan of UBS said Monday on CNBC.

"I don't think it's about contagions quite so much," he said. "Yes, there is clearly a risk, although it has to be said in the last couple of hours, the sound of backpedaling from Europe has been quite deafening."

On "Fast Money," Donovan characterized the chaos in Cyprus as what it would cost to bailout the next nation that requires assistance.

"For me, the issue is not so much that Cyprus spreads to other countries right now," he said. "The issue is that if another country gets into difficulties in the future, the cost of dealing with that will be a great deal higher, and the consequences of any possible future crises will be a lot more severe."

Donovan didn't see an end to the euro from the latest crisis.

"The political will behind it is dramatic," he said, adding that the euro "never have been created in the first place."

Donovan called out a failure of leadership.

"I think what politicians have failed to realize is just how dangerous bank runs can be," he said. "Once a bank run starts, it is very, very difficult to stop."

Even when bank deposits are insured, such as in the United States and the United Kingdom, Donovan added, "People do not behave rationally."

"If you let the genie of bank deposit losses out of the bottle, it's going to be very, very hard to get that back into the bottle, and that's what they're concerned about," he said.

Trader disclosure: On March 18, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Brian Kelly is long S&P ; Brian Kelly is long T NOTES; Brian Kelly is long GOLD; Brian Kelly is long EURO; Brian Kelly is long PLATINUM; Brian Kelly is long SILVER; Brian Kelly is long DAX; Brian Kelly is long EUROSTOXX; Brian Kelly is short COPPER; Brian Kelly is short KOSPI; Pete Najarian is long AAPL ; Pete Najarian is long BAC CALLS; Pete Najarian is long JPM CALLS; Pete Najarian is long YHOO; Pete Najarian is long BBRY; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is long COP CALLS; Pete Najarian is long MRO CALLS; Pete Najarian is long ABX CALLS; Pete Najarian is long CZR CALLS; Pete Najarian is long QQQ CALLS; Pete Najarian is long MTG CALLS; Pete Najarian is long EMC CALLS; Pete Najarian is long CROX ; Tim Seymour is long AAPL; Tim Seymour is long INTC; Tim Seymour is long SBUX; Tim Seymour is long TSO; Steve Grasso is long AAPL; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long GOOG; Steve Grasso is long GDX; Steve Grasso is long LF; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MU; Steve Grasso is long PXD ; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long VLO; Steve Grasso is funds long FB; Steve Grasso is funds long MSFT; Steve Grasso is funds long HPQ; Steve Grasso is funds long ZNGA.

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