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Banks Sit in a Tangled Web

Many European Lenders Have Sold Sovereign-Default Protection to One Another

European banks do have insurance against sovereign-debt default, but they've sold it all to each other, Laura Stevens reports on Markets Hub.

Dozens of banks across Europe have sold large quantities of insurance to other banks and investors that protects against the risk of ailing countries defaulting on their debts, the latest illustration of the extensive financial entanglements among the continent's banks and governments.

New data released last week by European banking regulators suggest the risks of banks suffering losses tied to European government bonds could be higher and more widespread than previously realized.