Reading, UK – JULY 5, 2021: British High Street Banks have halted account holders from buying or processing transactions related to cryptocurrency as the traditional banking sector intensifies its opposition to cryptocurrencies.
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European banks have faced severe challenges following U.S. President Donald Trump’s unexpected and aggressive tariff measures.
The European banking index continued to decline on Friday morning, recording a further 9.28% drop by 12:42 p.m. London time, with major institutions like Deutsche Bank, Intesa Sanpaolo, Banco Santander, and UniCredit each losing between 9% and 11% of their market value.
In Switzerland, which faces a U.S. tariff of at least 31% due to the new policies, shares of the continent’s leading bank UBS dropped by 8%.
The banks are struggling against a combined challenge stemming from their significant exposure to the U.S. market and the bleak outlook for the European economy.
Economists have cautioned that the tariffs enacted on Wednesday—imposing a blanket 10% tariff on all trade partners plus additional reciprocal charges on targeted countries—could increase costs for American consumers, potentially driving domestic inflation and raising the risk of a recession—an outcome that Allianz Chief Economic Advisor Mohamed El-Erian now deems “uncomfortably high.”
“While I don’t believe a U.S. recession is unavoidable due to the economy’s robust structure, the risk level is now uncomfortably heightened,” he stated in a CNBC interview, speaking with Silvia Amaro at the Ambrosetti Forum in Cernobbio, Italy.
Concurrently, Morningstar’s Suryansh Sharma warned on April 3: “Economic downturns (or recessions) adversely affect the U.S. banking sector’s loan growth, credit costs, investment banking fees, trading profitability, and asset management fees.”
Importantly, recessions often lead to falling interest rates, which further compress net interest margins in the financial sector, diminish loan demand, and increase the likelihood of defaults.
European banks, already grappling with this issue since the European Central Bank began rate cuts in June of last year, have shifted from a traditional lending focus to offering fee-generating services like investment banking and asset management.
In addition to navigating high uncertainty in the prominent U.S. economy, European and broader global financial institutions are at risk of disruptions and volatility in the dollar, given their significant reserves in the global currency.
They are also affected by the potential stagnation of European economic growth, as trade tariffs threaten demand for goods from Europe. Within the EU, which faces a 20% tariff, Poland has recently cautioned that U.S. protectionist trade policies could lead to a 0.4% loss of its gross domestic product, equating to around 10 billion zlotys ($2.6 billion).
In a Thursday update, Deutsche Bank warned that the euro area’s GDP could face a decline of 0.4 to 0.8 percentage points due to the U.S. tariffs, an impact greater than what was previously anticipated in their 2025-2026 forecasts.
The European Commission, the EU’s executive body, is currently working on a set of short-term economic strategies to bolster the region’s economy in light of U.S. tariffs, according to a Bloomberg News report from April 2—EU chief Ursula von der Leyen has only mentioned that the bloc is “preparing for further countermeasures to safeguard our interests and businesses if negotiations fall through.”
Bank of America Global Research strategists have warned about substantial downsides for the banking sector following the tariff announcements, noting that lenders have so far benefited from a strong underlying narrative and positive fiscal conditions in Germany, making them among the least advanced in adapting to potential global macroeconomic issues.
European banks, especially those based in Germany, have recently gained traction, alongside regional defense firms, after the EU and Germany relaxed debt rules to encourage security spending, which has raised expectations for a boost in regional lending activity.
