The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Europe: Banks need to bite funding bullet

Europe’s financial institutions must realize that the price of issuance is unlikely to improve any time soon.

While the stress tests have given investors greater clarity about European bank balance sheets, enabling them to tick that very important solvency box, the desire of Europe’s banks to come to the market with large benchmark debt issues still remains somewhat circumspect.

There’s a pure and simple reason for that. Funding costs in the bond markets remain high, relative to where they were in the first quarter, when a typical AA-rated bank could issue a benchmark five-year deal at 80 basis points over Libor. The sovereign crisis prompted that yield premium to almost double in some cases, and as a result many issuers have continued to sit on the sidelines.

They shouldn’t wait any longer. The harsh realization for European banks is that higher funding costs are here to stay, says Martin Egan, BNP Paribas’ global head of primary markets and origination. Indeed, now might be a good time to come to the market, given the recent rally in spreads on the back of successful sovereign issuance from some of the region’s peripheral sovereigns, such as Spain. That has led credit default swap spreads to rally on average 25bp to 30bp since the beginning of July.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree