European MFI exposure to domestic sovereign debt below peak, but still elevated

|By:, SA News Editor

The exposure of Europe's major financial institutions to domestic sovereign debt is on the rise, "now 9% of assets, up from a trough of 6% in September of 2009," FT writes.

Data from Citi shows European banks' total exposure (as a percentage of their balance sheets) to the general government debt of the country in which they are domiciled is generally below peak levels but is still well above the historical average for most of the periphery including Spain, Italy, Portugal, and Ireland.

"Although increased exposures are clearly part of ‘financial repression’ and ‘carry trade’, part of this is also a ‘natural’ trade-off from ongoing balance sheet deleveraging," Citi says.

Europe financials ETF - EUFN

Relevant European financials: DB, SAN, BBVA, NBG, BMDPF