European banks brace for sovereign contagion

Banks in economies as important as Italy, Spain and the UK could be hurt by the European sovereign crisis, according to Moody’s. In a report released on Thursday as Greek contagion worsened (see separate story) and bank spreads widened further, the rating agency identified common threats to the three countries’ banking systems and those in peripheral Eurozone states Greece, Ireland and Portugal as a result of their sovereigns’ challenges.