Alarmed by Europe’s latest debt crisis and its unpredictable outcome, banks are getting increasingly picky about who they do business with for fear of taking on risky exposures to rivals who could be about to be whipsawed by bad debts.
Greece’s slow-motion crash towards default, coupled with the poor health of banks in Spain, have left banks wondering if any of their fellow institutions will end up holding catastrophic losses and will be unable to meet their obligations.
All banks then are becoming increasingly cautious about their dealings with counterparties perceived to be in the firing line – making it harder for those firms to do their everyday business, throwing grit into the cogs of the financial system and ultimately crimping prospects for economic recovery.
via Banks shrink from counterparty risk as euro crisis rolls on | Reuters.
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