The Eurozone's financial regulatory framework, combined with the ECB's monetary policy, has created an environment in which holding sovereign bonds is the optimal outcome for many of the area's banks.
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| Source: Natixis |
1. Government bonds crowd out private sector credit, limiting loan growth in a number of countries.
2. Banks are becoming more intertwined with their central governments - something that was part of the cause of the debt crisis. Governments depend on banks for cheap funding and banks depend on their governments for support (bailout) in case of a liquidity crunch.
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