More than a decade on from the financial crisis, Europe’s banks are facing the first major test of their resilience.

This week growing fears about the coronavirus pandemic and an oil price war prompted a widespread market sell-off. Companies have spent a decade gorging on cheap debt in an ultra-low interest rate environment. A wave of defaults is now likely, and rising loan impairments will hit banks’ already anaemic earnings.

Since their recent peak almost a month ago, European banks indices have plunged 40 per cent in an indiscriminate sell off of financial stocks. This outpaces the 25 per cent fall over the whole of 2018  during the peak of the financial crisis. European bank shares now trade at the lowest level since the 1990s.

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