Problems for euro-zone banks

Banks in the euro zone are now faced with: A growth slowdown in the euro zone, probably leading to an increase in borrower defaults (in the cost of risk); Due to the growth slowdown, the subdued inflat i on and the rise in risk aversion, a flattenin g of the yield curve that is probably set to last. The problems faced by euro-zone banks explain the drastic fall in their share prices and the rise in the risk premia on their bonds, although these movements do seem excessive.