The cost of protecting European bank bonds from default surged to the highest level in 13 months as Moody’s Investors Service said lenders face “very real, common threats” from the region’s fiscal crisis.
Banking systems in Greece, Portugal, Italy, Spain, Ireland and the U.K. may come under pressure as the crisis worsens, Moody’s said in a report today, according to Bloomberg.
“The risk is for the banking sector because they’re the ones that own most of the government bonds and in cases of extreme crisis banks rely on governments to bail them out,” said Juan Esteban Valencia, a London-based credit strategist at Societe Generale SA. “If governments can’t issue at relatively normal levels, it’s going to be very difficult to bail out banks and that means banks are getting hammered
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