BBC News
November 23, 2011
Has concern about whether eurozone governments can repay their debts elevated fears about the health of eurozone banks?
You would expect that to happen, given the way that banks both provide financial support to governments and are supported by them (as I discussed yesterday).
To repeat: banks are encouraged by financial regulation to be big investors in government debt or bonds, so are exposed to substantial losses as and when there's a risk of the relevant governments failing to repay all they owe; in extremis, a bank's liabilities are guaranteed by the state, but that guarantee isn't terribly valuable as and when the state itself is perceived to be in danger of going bust.
So with the governments of two big economies, Italy and Spain, finding it harder and more expensive to borrow, it would make sense for there to be evidence of increasing stress in the banking system. Is there evidence of such stress?
Well, data published by the European Central Bank suggests there is.
More
No comments:
Post a Comment