Global Journal of Management and Business Research, D: Accounting and Auditing, Volume 22 Issue 2

Source: Bank for International Settlement, 2010 Figure 9: European and Foreign Banks Debt Exposure to PIIGS Therefore, as commercial banks worried about each other’s solvency and exposure level to sovereign debt default, counterparty risk increased. Interbank lending slowed down following a dramatic increase of the interbank interest rates within the Eurozone from March 2010 as shown in Figure 10. Source: Bloomberg, 2014 Figure 10: EURIBOR vs. EONIA, 2009-2014 In addition, consumers´ concerns about insolvency increased, thus deposits were withdrawn from banks from countries where the banking system was perceived as risky (Allen and Moessner, 2012, pp. 1-26). As shown in Table 2, the growth of deposits from clients and banks slowed down within the euro area (Allen and Moessner, 2012, pp. 1-26). The table also depicts a downward trend in inter- commercial banks loans. Between July 2008 and June 2011, it decreased by €593 billion which highlights the serious loss of confidence among euro area commercial banks. Table 2: Combined Balance Sheet of Euro Area Commercial Banks, 2007–2012 ASSETS (€Billion) LIABILITIES (€Billion) Changes Loans to domestic households and businesses Loans to commercial banks Deposits from households and businesses Deposits from commercial banks Jul 07–Jun 08 961 713 1,009 717 Jul 08–Jun 10 339 -106 969 275 Lessons Learned from European Sovereign Debt Crisis 60 Global Journal of Management and Business Research Volume XXII Issue II Version I Year 2022 ( )D © 2022 Global Journals