European banks brace for sovereign contagion

06 May 2010

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.

"In Greece, Portugal and Italy the banks are challenged, or could potentially be, more as a consequence of the pressures on the sovereign rather than due to their own inherent creditworthiness," said the report, Sovereign Contagion Risk — Assessing the impact on the banking systems of Southern Europe, ...

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