It seems that investors have been increasingly losing confidence in banks’ ability to live up to their payment obligations under “normal” market conditions and to generate sufficient profits going forward.
Such an interpretation may contribute to explaining the depressed valuations of eurozone bank stocks, which have lost around 71 percent of their value since the start of 2007. In contrast, losses for US bank stocks amounted to (just) around 50 percent.
CONTINUED at the Ludwig von Mises Institute. Written by Thorsten Polleit.