European banks could face liquidity problems and overall profitability could decline should the euro debt crisis force lending institutions to write-off huge losses. The European Central Bank is providing funds to lending institutions, but this is at best, a temporary solution.
“There is a lot of mistrust,” said Christoph Rieger, co- head of fixed-income strategy at Commerzbank AG in Frankfurt. “Banks are trading with the ECB rather than with each other.”
Source: Bloomberg