Greek Debt Claims by Nationality of Bank

October 05, 2011

With the global equity markets moving every day on the latest news of the European debt crisis – specifically the Euro-zone’s handling of the Greek crisis – it is important to understand banks’ actual exposure levels (direct and indirect) to Greek debt. Direct exposure entails the outright holding of Greek promissory notes, while indirect exposure comprises derivative contracts, extended guarantees, and credit commitments.

French banking institutions have the largest amount of direct exposure at $56.9B, followed by German ($23.8B), British ($14.7B), American ($8.9B), Italian ($4.5B), Swiss ($3.1B), Japanese ($1.3B), and Spanish ($1.1B) firms. On a direct basis, American banks appear somewhat secure relative to their French, German, and British counterparts. However, U.S. banking institutions by far have the most indirect (possibly construed as riskier) exposure at $38.4B, followed by French ($8.4B), German ($5.2B), British ($4.6B), Italian ($1.7B), Swiss ($1.4B), Spanish ($0.4B), and Japanese ($0.06B) banks.

Any default or writedown of Greek debt will greatly affect the financial systems of all countries with repercussions likely to spread throughout the global stock market. Per SEC filings, JPMorgan, Citibank, Bank of America, Goldman Sachs, and HSBC collectively have $52.4B of exposure to the PIIGS nations. While a bailout is likely for the troubled European nations in some way, no clear resolution has been reached. Unfortunately, global equity markets can be expected to feature elevated volatility until the debt problems of Greece and its fellow European countries are completely resolved.