Greek banks hold the highest proportion of long term sovereign bonds among major European banking systems, according to a report published by credit rating agency Morningstar DBRS on October 7, 2026.
The agency found that 71 percent of government bond portfolios held by Greek lenders mature after more than five years.
Morningstar DBRS said this long duration makes Greek financial institutions more sensitive to interest rate changes if bond yields rise further across Europe.
In its latest evaluation, the rating agency assessed that the connection between European banks and national sovereign debt has become less direct since the regional debt crisis. However, Morningstar DBRS noted that the link has not vanished.
The agency examined whether the vicious circle between sovereign risk and banking risk has been broken. It concluded that the underlying risk has transformed rather than disappeared.
Sovereign bonds and duration exposure
Sovereign bonds are fixed income securities issued by national governments to finance public expenditure and manage national debt. Financial institutions hold government bonds on their balance sheets to maintain liquid assets and meet regulatory requirements.
Bond duration measures how sensitive a portfolio is to movements in interest rates and market yields. When central banks adjust interest rates or market yields rise, the market value of longer term bonds declines faster than that of short term securities.
European banking sector risks
The relationship between commercial lenders and sovereign debt became a key vulnerability during the Eurozone sovereign debt crisis. When government borrowing costs spiked, banks holding large volumes of national bonds suffered capital erosion, creating a feedback loop between state finance and banking sector stability.
Morningstar DBRS indicated that while structural reforms and healthier bank balance sheets across Europe have softened this direct feedback loop, portfolios with heavy concentrations of long maturity state debt remain exposed to changing yield environments.
