This is the idea whereby Banks and Sovereigns are inseparably exposed to each other. This is seen through weak, over-indebted governments and their relationship to the solvency of their banks and vice versa. This concept was evident during the Global Financial Crisis.
Key learning objectives:
Discuss the relationship between Banks and Sovereigns, and the consequent impact on the economy
Explain the improvements in Bank regulation to mitigate ‘SBDL’ and evaluate their success
Identify ways to potentially break the sovereign bank doom loop.