Privileged regulatory treatment of lending to sovereigns  Ladies and gentlemen, the problems caused by the interdependencies between governments and banks take on a special form in the current regulatory framework of European monetary union. This is reflected, amongst other things, by the fact that there is often very little diversification in European banks’ loans to sovereign debtors.
On the contrary, in many cases, the vast majority of the government bonds held by euro-area banks are issued by just one sovereign – their domestic government. For example, in December 2014, 98% of the loans from Greek banks to euro-area sovereign debtors were granted to the Greek government.