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With European banks under pressure, recession isn't out of the question — but the current panic is overdone, one expert told CNBC.

"The bigger issue right now for the global markets is confidence that Mario Draghi ... and the [European Central Bank] are providing the liquidity that's necessary," Bob Diamond, former group chief executive of Barclays, told CNBC's "Closing Bell" Wednesday.

There is a chance of two consecutive quarters of of contracting economic growth, Diamond said. The situation is not as dire as during the last recession, he said. But as the dollar becomes more globalized, central banks, including the Federal Reserve, will have to shift past focusing just on the local economy, he said.

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Diamond's comments come as the market's been in a tug of war with European commercial banks, with stocks of companies like Deutsche Bank and HSBC declining double digits so far this year.

Executives like Deutsche Bank co-CEO John Cryan were quick to reassure investors this week even as cash is crunched by ailing energy loans. Meanwhile, investors were seeing flashbacks to 2008's financial sector defaults.

While European banks were slower than their American counterparts to react in 2008, insolvencies akin to the global financial crisis are "off the table" today, Diamond said. Rather, the banking paradigm has shifted.

"As you think about the larger banks and their global operations, for the last 5, 10, 15, 20 years, there's been a capital synergy — a product synergy, and a client synergy — to being large and global and interconnected," Diamond said. "The truth today is there's a capital dis-synergy. And I think the market hasn't quite adjusted to that yet."