Banks pull up the barriers as euro break-up fear takes hold

Europe’s financial services single market is fragmentingas regulators pressure banks to retreat behind their national borders amid mounting fears of a euro break-up, reports The Times. A report by US investment banking firm Goldman Sachs says interbank lending across Europe has dropped, leading to a reduction in the flow of credit from Northern Europe to the South. The daily continues –

The trend is being driven in part by national supervisors, which are pushing local banks to build up capital and liquidity at the expense of other EU countries. Compounding this is the fear of euro exit … which is prompting banks in Northern Europe to curb their exposure to Mediterranean countries for fear that their loans will be repaid in reintroduced national currencies. German banks’ lending to Italian banks halved as a share of the latter country’s quarterly GDP between the pre-Lehman period and the first three months of this year, Goldman found.