European banks could be hit by the crisis in Greece

The crisis in Greece could affect the banking system in other European countries like Spain, Ireland, Italy, Portugal and the UK, according to a report by ratings agency Moody’s.

Because banks face different challenges, “the risk of contagion could dilute these differences and pose common and very real threats to them,” the report says.

The infection is mainly generated by market concerns about the profile of its sovereign debt, but in which, prior to this pressure, the system had not suffered so much the blow of the subprime mortgages.

This is the case of banks in Greece, Portugal and, to some extent, Italy, the agency said.”Despite facing a fundamentally different situation compared with Greece, Portugal is now under special scrutiny from investors, which has resulted in the decision to revise the rating for possible downgrade, of all Portuguese banks,” it said.

Moody’s explained that some banking systems are weakened from within, in many cases by excessive growth of loans, citing mainly to Spain, Ireland and to a lesser extent, UK.

In the case of Italy, it stressed that “the banking system had been relatively strong so far,” but in the current circumstances “could be facing a situation of infection by increasing the market pressure on its sovereign debt.”

“The infection could potentially also be extended to those banking systems where the value of sovereign debt has been impacted by developments in the banking system,” it added.

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