SOVEREIGN RISK:FRANCE AND Germany, likely to have the biggest say in the politics of a bailout for Greece, are also the countries whose financial institutions would be among the most exposed to a default.
Weighing the sovereign risk borne by banks is difficult but figures from the Bank for International Settlements – sometimes referred to as the central bank for the world’s central banks – show that European exposure to Greece is concentrated in French and Swiss banks, each with almost $79 billion (€58 billion).
German banks have about $43 billion of exposure, about half through holding Greek debt to provide backing for issuance of so-called covered bonds.
Kian Abouhossein, banks analyst at JP Morgan, said it was “not unreasonable” to see banks in France, the UK and Italy as the most exposed to sovereign risk, though he said it was impossible to establish definitively which sovereign risk banks held. “Some big banks might have €50 billion of sovereign bonds, others might have €150 billion, but there is no disclosure of which bonds they might be.”
Some of the biggest French exposure comes through direct ownership of local banks in Greece. Crédit Agricole controls Emporiki, Greece’s fourth-largest bank, with a €30 billion balance sheet; Société Générale, France’s second-largest bank, owns Geniki, the Greek bank with a €5 billion balance sheet.
In November, Agricole was forced to take a €485 million hit on its investment in Emporiki through an impairment writedown. – (Copyright The Financial Times Limited 2010)
