Part 9/14:
European banks, unlike their American counterparts, lack explicit government guarantees akin to the US’s bailouts. For example:
Barclays in the UK declined over 6%
Deutsche Bank and Chinese banks have faced similar pressures
This discrepancy raises concern that any future crisis could trigger a global ripple, amplified by the fragile state of international financial institutions.
Why the Market’s Response Is Deceptively Calm
Despite the alarming signals, stock indices like the S&P 500 have shown resilience, rebounding quickly after initial declines. The reason? Market participants expect bailouts to cover losses and shield banks from ultimate failure, setting the stage for moral hazard.
The pattern is familiar: