Despite being more levered than their US peers before the crisis, euro area banks improved their leverage ratio by just 0.9 percentage points, from 3.7 to 4.6%, and this was achieved more through shedding assets and less through raising capital.7 This in part reflected the fact that, due to the fiscal rules, public support for banks was concentrated in countries with fiscal space.
Moreover, without a common resolution framework only around 50 banks were resolved in the euro area in this period.8 So a weak banking sector continued to drag on the euro area economy, which was especially pernicious given the importance of the banking lending channel for financing.