Investment Banking

European banks pile into government debt, setting up ‘doom loop’ scenario

European banks are doing something that got them into trouble years ago: loading up on government debt, a trade investors call the “doom loop”.

Banks in the eurozone, stuffed with excess cash thanks to Covid-19 central bank relief efforts, bought close to €200bn in government debt of their home countries in the year to September. That has raised their holdings by 19% to €1.2tn, according to the European Central Bank.

WSJ Logo