The second reason that may explain the assessment of excessive credit risk of the euro area countries is the own goal that European countries scored when they embraced the concept of private sector involvement in October 2010.
(Assuming banks’ average liability is about one year). (b)  Receive floating overnight rate and pay 10-year in IRS market. This effectively synthetically transforms a one year floating-rate liability of bank into a synthetic 10-year fixed- rate liability. By loading margin over this rate, banks can make a 10-year fixed-rate loan to a mortgage borrower.