Cutting back on dividends and issuing new shares might have been strong positives for the banks’ overall set of stakeholders, as well as for society more broadly, but were clearly negatives for shareholders, given that such actions would have entailed large transfers to underwater creditors.
Changes in interest rates were equally transmitted through banks to all parts of the euro area economy. But a key feature of this crisis has been the fragmentation of financial markets along national borders. Businesses based in stressed countries now face worse borrowing conditions than equally risky competitors in non-stressed countries.