Political events matter in economics. This paper uses the 2011 political standoff over the rise of the US debt ceiling to characterise an instrument that is then used to estimate the impact of sovereigns’ on bank credit risk. Results show that a 100 basis points increase in US sovereign default risk produces a 40 basis points increase in bank credit risk. Calculations also suggest that, as a consequence of the debt ceiling crisis, US bank funding costs increased by approximately 18 basis points.