What is the Sovereign Bank Doom Loop?

What is the Sovereign Bank Doom Loop?

Keith Mullin

35 years: Capital markets editorial

The sovereign bank doom loop has been one of the most discussed, analysed and researched topics since the Global Financial Crisis. In this second video of the series, Keith explains what is the sovereign bank doom loop, its impact, and what regulators are doing to try to mitigate this risk.

The sovereign bank doom loop has been one of the most discussed, analysed and researched topics since the Global Financial Crisis. In this second video of the series, Keith explains what is the sovereign bank doom loop, its impact, and what regulators are doing to try to mitigate this risk.

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What is the Sovereign Bank Doom Loop?

5 mins 39 secs

Overview

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.

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Summary
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