Governments and domestic banks in Europe have attracted too much criticism lately due to heightening inclination of banks to hold more local sovereign debt in the midst of the crisis, which has been interpreted as an evidence of financial repression or moral suasion. By using a novel dataset on bank-level exposures of sovereign and private debt covering the entire Eurozone crisis, I first confirm that sovereign debt has been reallocated from foreign to domestic banks at the peak of the crisis. Furthermore, this reallocation has been especially visible for banks as opposed to other domestic agents. However, in contrast with the previous literature emphasizing only the increasing home bias in sovereign debt, I show that such reallocation also occurred (even to a larger extent) in banks’ private exposures. Finally, I present a clear information channel and demonstrate that foreign banks –free from moral suasion- with more branches in crisis countries have increased their exposures to these countries during crisis. Overall, the evidence is only compatible with the argument of rising informational asymmetries between domestic and foreign banks.