Banks stress-testing portfolios against sovereign default

Risk roulette


The life of Shakespeare’s Hamlet is underpinned by a single, unwavering certainty – that he will succeed his father on Denmark’s throne. When his uncle takes the crown instead, the young prince is plagued by doubts and possibilities – suddenly, it seems, anything can happen.

Banks now find themselves in a similar situation: the conviction that eurozone governments are risk-free has been overturned, and the world suddenly looks very different. If Greece can default, so can Portugal – maybe even S