Thursday, February 11, 2010

Greece and the Fed's Exit Strategy Move Bank Stocks

U.S. banks have $176 million dollar exposure to the sovereign debt of the PIGSs (Portugal, Ireland, Greece, and Spain.)

Michael Corkery in the Wall Street Journal's "Deal Journal" asks, "So just what is the exposure of U.S. banks to debt in these four nations? 'Overall, we believe that the direct risk of the large U.S. banks to Ireland, Greece, Portugal and Spain is modest,' writes Barclays analyst Jonathan Glionna in a research note.

"Barclays analysts estimate the 10 largest U.S. financial institutions have a total of $169 billion of their loans tied up in the four troubled Euro nations. That is about about 19% of those banks’ combined Tier 1 capital, or the cash cushion that banks keep to absorb bad loans. Looking at the combined exposure of the 10 largest banks and the other 63 U.S. banking firms that supply cross border information to the Federal Institutions Examination Council, the total exposure is $176 billion. By country, the overall exposure of those 73 banks is $82 billion to Ireland, $68 billion to Spain, $18 billion to Greece and $9 billion to Portugal."

Alistair Barr reports on the effect of this and the Fed's exit stretegy on Market Watch. 

Speaking of PIGS, the UK's debt is starting to smell of bacon to use Ian Bremmer and Nouriel Roubini's phrase. Sara Schaefer Muñoz reports that British banks have a heavy exposure to UK soverign debt.  What about the Yanks?

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