The European debt crisis lurches on as the uncertainty around government finances continues. Yet how much do banks know and choose not to disclose about the state of the debt markets? In this report, Christine Harper and Michael J. Moore show how investors aren’t being told the risk banks face in the case of a default on European sovereign debt.
JPMorgan Chase & Co. and Goldman Sachs Group Inc., among the world’s biggest traders of credit derivatives, disclosed to shareholders that they have sold protection on more than $5 trillion of debt globally.
Just don’t ask them how much of that was issued by Greece, Italy, Ireland, Portugal and Spain.
The euro crisis is being prolonged by doubts over governments’ ability to repay debt. However, banks may have more visibility on that than on the ability of their competitors to settle accounts in the case of a default.