Around half of European banks’ €3.3trn (US$4.5trn) of debt will mature over the next three years, with €550bn coming due this year alone. According to new research from Morgan Stanley, the cost of rolling over this debt will be more expensive than in the recent past.

Concerns about sovereign fiscal health are “increasing the ‘risk’ in the ‘risk-free’ rate,” Morgan Stanley argues. Some €1.6trn in gross government debt issuance this year also risks crowding out private-sector capital. In addition, banks shortened the terms of their borrowing during the financial crisis, so extending maturities will come at a cost. Greater issuance of non-guaranteed debt will also push up costs; in the fourth quarter of last year, government-guaranteed issues fetched spreads 40 basis points lower, on average, than the non-guaranteed variety. Even without widespread hikes in central banks’ policy rates, private-sector lenders’ cost of capital is on the rise.