How Badly Will a Greek Default Hurt US Banks?
$41 billion dollars bad according to MartketWatch. The article cites the most recent statistics published by the Bank of International Settlements on June 9th, that chronicle each creditor’s relative exposure to the financially embattled Greeks. 83% of that money is estimated to be at risk indirectly, or as cash that could be collected on insurance claims by direct debt-holders.
Even with an official statistic from an NGO, the data is far from certain, and there may be much more capital that US bankers stand to lose. According to one economist, “We don’t know exactly what the form of exposure…We can only make educated guesses.” Our guesses may become more educated soon, as Moody’s (NYSE:MCO) and other credit agencies are starting to lower ratings on banks thought to hold large degrees of exposure to Greek Debt. Just yesterday, the investment service put long-term debt and deposit ratings under warning for possible downgrade at three large French banks, Credit Agricole SA (NYSE:ACA), BNP Paribas SA and Societe General SA.
Moody’s made its reasoning very straightforward,”The primary focus of all three reviews will be the banks’ credit exposures to Greek government debt and the Greek private sector and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels.”
What likelihood do American banks have of sharing the same fate? Apparently a very slim one. According to SEC filings, Bank of America (NYSE:BAC), is the US bank with the largest direct exposure to Greek debt, at $$477 million. JP Morgan (NYSE:JPM) and Citigroup (NYSE:C) listed their exposure under “cross-border risk” and did not have to provide an exact amount unless it exceeded a certain percentage of the banks’ total assets (meaning it was probably very small).
Default worries drove the market to the ground yesterday, compounding fears that the turmoil from a Greek Default would be worse than Lehman Bros, as one source recently suggest.