European Banks Loaded With Greek Debt

BNP, Commerzbank, HSBC, SocGen, Natixis, BNP, CA, AXA, ING and Rabobank all identified as banks with massive Greek repo exposure. The next question is; will writedowns on these now illiquid and  –  as the Greek bond market is effectively shut down for a second day running – untradeable positions be taken?

“Or will Europe follow the U.S. in pretending tens of billions in valuation gaps will be filled by “Hopium?”

Zero Hedge

“As shown by the recent downgrade of Greek banks as a result of sovereign weakness, the potential contagion of sovereign risks to banking systems could spread to other countries such as Portugal, Spain, Italy as well as Ireland and the UK,” Moody’s Investors Service says in a new Special Comment.

Overall, Moody’s notes that each of these countries’ banking systems faces different challenges of different magnitudes, but warns that contagion risk could dilute these differences and impose very real, common threats on all of them.

This Special Comment assesses the contagion risk for those systems where the transmission mechanism primarily stems from the market concerns about the sovereign credit profile, but where, prior to this pressure, the banking systems had been less affected by asset price bubbles or exposure to structured financial products. These are the banking systems of Greece, Portugal, and to some extent Italy. Despite facing a fundamentally different situation compared with Greece, Portugal is now under heightened investor scrutiny, resulting in this week’s review for possible downgrade on the ratings of all Portuguese banks.

A key factor determining whether contagion risk continues in this case will be the market’s view of the likely success or otherwise of the recently agreed IMF and European Union support package for Greece.

Italy is another country where the banking system had been relatively robust so far, but where the major risk to its banking system could also be challenged by contagion risk should the market pressures on the sovereign increase.

The Special Comment then explores those banking systems that have weakened from within, often due to excessive loan growth (mostly Spain and Ireland and to a lesser extent the UK); contagion could potentially also spread to these banking systems where sovereign creditworthiness has been impacted by developments within the banking system.

Moody’s new report, the first of a two-part series, is based on a presentation that Moody’s senior analysts made to investors in various European cities throughout April 2010.

The second and forthcoming part of this series, which will be published shortly, will assess the exposures and capital implications for major European banking systems to the four (most) vulnerable countries, the rating agency writes.

French Toast

According to Bankingnews.gr the French finacial industry is the one with the heaviest exposure to Greek debt.

Banking News writes:

At the time of accepting the Greek toxic bonds repo agreements some banks such as Commerzbank and HSBC had entered into repo with Greek banks from 1.5 to 2 billion each. These banks have sought various ways to get rid of the Greek bonds, but the repo does not break easily.

From foreign banks big exposure to toxic Greek bonds – say toxic as these CDS spread and toxic only be described – are BNP Paribas 5 billion multi-repo in Greek banks.

The Commerzbank 3.1 billion in repo to a large Greek bank.

The HSBC 2 billion in bonds through repo Greek by a Greek major bank.

The Societe Generale 3 billion

The Natixis to 830 million.

The BNP Paribas said it would retain the Greek bonds over the next 2-3 years (5 billion) and borrowings of Greek (3 billion euros)

The Credit Agricole 500 mn euros Zurich Finance 400 mn dollars, AXA 500 mn euros.

The French banks and insurance companies have the greatest exposure to toxic Greek bonds.

Positive support of the Greek debt and Dutch banks hold funds with 12 billion. The Greek bond ING holds 3 billion and Rabobank 300 million.

I guess there’s more to come…

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