EU banks' €200bn exposure to sov debt
Friday 15 July 2011 - by Jacqui Street
The European Banking Authority has calculated the exposure of European banks to the current sovereign debt crisis in Greece, Ireland and Portugal at €200bn ($283bn) but admits it has not addressed the possible side-effects to banks if the crisis spreads.
"In such cases the capital shortfall should be easily covered with credible backstop mechanisms such as the support packages already issued or being defined for Ireland, Portugal and Greece," says the EBA.
But the EBA says its analysis of exposures to the sovereign debt crisis does not take into account the knock-on effects of downturns in investor confidence and on EU banks and non-bank entities. The EBA and warns that these effects may be "significant".
There was no mention of exposure to sovereign debt in Spain or Italy. The calculations were made to the end of 2010 and did not take into account the worsened sovereign conditions in 2011.
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