Sunday, July 13, 2014

It would not be an exaggeration to call the banking sector a pillar for a nation's economy. It is a key organ, any disturbances in which can have serious implications for an economy. Some of the worst financial crises in the global economic history find their origins in the mess within the banking and financial sector. While the financial crisis of 2008 is still haunting the global economy, a new one seems around the corner. With Portugal's biggest banks showing sign of crisis, a panic has gripped the entire European economy. The case in point here is Banco Espirito Santo. The trading of the bank has been suspended by Portugal's regulator as its share price crashed 17%. The event has exposed fault lines in the European banking system, sending tremors to the entire European economy. In response, the STOXX index of European lenders has declined by around 11% since early June and has fallen to lowest level this year. Further, as an article in Telegraph suggests, the yield on country's 10 year debt has come down. Greek, Italian and Spanish debts have been other casualties. And this is just the beginning we believe. We would not be surprised to see other major economies getting caught in the doom loop.