Sovereign debt crisis is a bank debt crisis too

It’s the sovereign, stupid

Sometimes you just can’t do anything right. European banks have spent the three years since Lehman collapsed working on their balance sheets: raising capital ratios, improving risk management and liquidity management, hacking away at their loan-to-deposit ratios and reducing their reliance on interbank funding. And where has this got them? Absolutely nowhere.

The funding environment for European banks could hardly be bleaker. In August they issued just €2.7 billion – the lowest figure since December 1992, according to Citi.