samedi 14 janvier 2012

In the Eurozone sovereign and banking risks are highly interrelated with each other

Nouriel Roubini : In the Eurozone sovereign and banking risks are highly interrelated with each other. The banking risk became sovereign when the banks were bailed out, but now sovereign risk has become a banking risk because a large part of the public debt is held by the banking system.Right now there is a credit crunch and this credit crunch is becoming more severe because banks do not have enough capital, liquidity and have to reduce their leverage by essentially reducing credit and disintermediating. That's going to create more credit crunch.ECB is not a last resort for the sovereign, but has been increasingly playing a role of lender of last resort for their financial system. Without the liquidity support by the ECB, the credit crunch, deleveraging and the run on the banks will become even more severe. - in ET Now

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