In our opinion European banks increasingly face the challenge of
being stuck between a rock (increased regulatory requirements) and
a hard place (pressure to grow lending whilst facing increasing
funding pressures). Banks will need to deal with increased funding and
solvency pressures, in addition to regulatory constraints on liquidity
management, which ultimately should incentivize banks to reduce
balance sheets. We think that this strategy will mostly be undertaken by
banks rolling over a lower proportion of non-loan assets and loan
commitments at maturity, rather than the aggressive pursuit of asset
sales.
 Given these constraints, we have modeled a deleveraging strategy for a
peer group of 28 of the largest European banks for which we estimate a
maximum net reduction of