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Big banks’ health is Europe’s big financial concern once again.

Many European banking institutions failed to cope when oil prices plummet seriously. So the stock exchange markets in EU do not tend to grow. There is a growing discontent among those banks investors. Many of them fear the worst – banks mass defaults of obligations.

The price to insure Deutsche Bank’s (DB) debts has increased almost twice over the past few months. Now it reached the highest level since the 2011 turmoil of sovereign debts, according to FactSet. Swiss bank Credit Suisse (CS) is also heavily criticized. The insurance cost of its debt jumped twice as well.

Fears for European banks adds up to global world economy slumps. And sparked rumors

People still remember the Great Recession of 2008, it looms over investors. It doesn’t take a lot to spook everyone into being afraid that we’re going to have another global financial downturn.Will Smith

Thats Ed Yardmen’s point if view. He’s a president of investment consulting group Yardeni Research. Of course, today’s shortages of banks is not even close to the Great Recession crisis at this moment. And big banks in the America and EU grew much stronger since that turndown. Still, banks are causing some kind of panics this year. Shares of Bank of America (BAC) are down 27% this year while Goldman Sachs (GS) is 18% in the red. By comparison, the Dow is down “only” by 8%. European banks are doing even worse. Euro STOXX bank index lost around 30%, effectively downing to three-year lows. Deutsche Bank has dropped almost half its stock value over the past few months. “Now each bank in Europe and elsewhere is having its investment returns viability placed under big question mark…”. Michael Block, chief market strategist at Rhino Trading, told in a client note. So why do banks globally are having such are a hard time now?

New recession and oil prices effect

First, banks investing groups are on alarm. It is connected with the increased risk of new, bigger global recession. They are afraid that banks, and specifically big European ones  heavily depend on risky trading revenue.  Done instead of more stable and predictable deposits, they could suffer themselves a collapse.

Rumors that Deutsche Bank can be not affording itself to pay off interest rates for some debts due in April were a game changer. It forced Germany’s biggest bank to come out to worrisome investors twice in the course of 24 hours. John Cryan, the bank’s co-CEO, claims Deutsche Bank is “absolutely rock solid.” The other big crisis factor is the drop in commodities price — especially oil. Energy companies took a huge debt burden when oil was being sold at $100 a barrel. Now that it’s at $28, these loan defaults are on the rise and many small and mid-sized oil companies have already filed for bankruptcy.

So, all investors are worried big banks have done nada to brace for the coming uprise of oil defaults. Especially now, as oil tends to stay below $40 threshold for a long time. Will shale loans turn into the 2016 version of subprime for real estate and CDOs, synthetic CDOs? Government bankers are also making investors freaky. For example, U.S. bank stocks came up last year. It happened on a  wave of hopes the Federal Reserve would noticeably up the rates in 2016. Higher rates would have given banks more room to make money. Namely, on the difference between the interest they pay out on deposits and what they are taking on loans and credits.

But the 2016 market disaster has made chances the Fed raises rates much this year almost impossible. Frankly, worldwide central bankers are actively going the other way. The EU Central Bank prints new banknotes daily. It has and has even implied at more stimulus to come. And the Bank of Japan shocked the markets by introducing negative interest rates.

“The scaring potential for a lengthy zero interest rate environment is spooky. made investors speak up against European banking shares,”. Relte Stephen Schutte, an analyst at research firm Markit, wrote in a note. Though, big banks are way healthier than in 2008. But some believe the financial “curing” has not been complete. Some think the “disease” of “not-to-big-to-fail” lingers on. “But still there’s very few systematic “errors” in the system now. Fewer than even in 2011, let alone 2007/2008,” Bespoke Investment Group wrote in a note.

Bespoke group also highlighted that big bank balance sheets are “dramatically” less leveraged.  Also they made it vocal that lenders have been forced to hold back a lot of capital to avoid future losses. Nevertheless, Bespoke said big banks can handle even the worst-case scenario. They could suffer a write-down of all their energy loans by using just twenty-five percent of their revenues. “I don’t think there is any economical crisis risks here. Bank capitalization in the United States and Europe is awfully good. It’s hard to be worried about it,”.  Said David Kelly, chief global strategist at JPMorgan Funds.