15 MAR 2011
The total exposure of foreign banks to the struggling quartet of Greece, Ireland, Portugal and Spain tops $2.5 trillion (£1.6 trillion) once all forms or risk are included, according to the latest data from the Bank for International Settlements.
By Ambrose Evans-Pritchard | The Telegraph
On an "ultimate risk" basis that includes the potential loss on derivatives and credit guarantees of different kinds, the figure rises to $2.51trillion as of September 2010, well above the headline figure of $1.76 trillion in cross-border loans. The sheer scale highlights the systemic dangers if the EU fails to stabilize the debt crisis.
Eurozone leaders agreed to boost the lending power of the EU bail-out fund on Friday, but Germany vetoed proposals for a debt buy-back scheme or an activist policy of bond purchases.
The BIS, the central bank of central banks, said in its quarterly report that Germany had $569bn of exposure to the quartet, France $380bn, and the UK $431bn.
A chunk of British exposure is on behalf of Mid-East and Asian clients banking through London. Italy has just $81bn at risk and seems uniquely insulated from the crisis all around it.
The geography of risk varies greatly. British-based banks and subsidiaries have $225bn at stake in Ireland, and $152bn in Spain, but little in Portugal or Greece. France is up to its neck in Greece with $92bn; a Benelux-led group has $180bn in Spain, and Spain itself has exposure of $109bn to Portugal.
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