Goldman Sachs cuts outlook for European bank debt over Credit Suisse crisis

LONDON (Reuters) - Goldman Sachs has cut its recommendation on exposure to European bank debt to neutral from overweight, saying a lack of clarity on Credit Suisse's future path would put pressure on the broader sector in the region.

Credit Suisse was thrown a $54 billion lifeline by the Swiss central bank on Thursday to shore up liquidity after a slump in its shares and bonds intensified fears about a global banking crisis.

"The Swiss National Bank's decision to provide Credit Suisse with significant and inexpensive liquidity fell short of stabilising sentiment in both the equity and credit markets," Goldman Sachs analyst Lotfi Karoui wrote in a note to clients dated March 17.

Relative to 15 years ago, the sector's fundamentals were stronger and the global systemic linkages weaker - a trend that greatly limited the risk of a potential vicious circle of counterparty credit losses, Karoui noted.

"However, a more forceful policy response is likely needed to bring some stability."

Goldman Sachs initiated its overweight recommendation on European bank debt in mid-January.

Credit Suisse Group AG entered a make-or-break weekend after some rivals grew cautious in their dealings with the bank and regulators urged it to pursue a deal with Swiss rival UBS AG.

(Reporting by Karin Strohecker, editing by Kirsten Donovan)