Three Great Charts From Goldman On The Sovereign Debt Threat To Europe's Massive Banking Sector

Europe's economy is far more reliant on its banking sector than the U.S., and any damage from a European default would have a significant impact, according to Goldman Sachs.

Bank analyst research shows that the continent's capital markets are more reliant on bank assets than the U.S.. This means that if a crisis erupts in the continent's banking sector, as a result of a default, and banks have to take losses, the region's economy will slow.

Note the outsize proportion of bank assets as a percent of GDP, compared to the U.S.

Further, if financial shares tumble as a result of banking sector stress, it's going to hit European markets harder than a similar scenario would in the U.S.

And Goldman notes banks' exposures to the sovereign debt that could trigger this crisis. Note, Greece is not a major problem, but Ireland certainly poses a threat.

For the latest investing news, visit Money Game. Follow us on Twitter and Facebook.

Join the conversation about this story »

See Also:

• Another Reason Why A Series Of European Restructurings Could Be Disastrous
• The New York Fed Explains Why Gigantic Cash Reserves Don't Lead To More Bank Lending
• Housing Double Dip About To Slam UK, Just As Central Bank Plots Raising Rates

Source: http://feedproxy.google.com/~r/TheMoneyGame/~3/YBT5OLHTi4k/why-a-european-banking-sector-crisis-is-2011-6

Guide To Financial Fitness Money Game Tech Crunch Personal Finance News & Advice