Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) lossif the euro crisis results in the single currency bloc breaking apart, according to one of the first indepth analyses of what might happen if the eurozone disintegrates.
The analysis by Credit Suisse estimates that up to 58% of the value of Europe's banks could be wiped out by the departure of the "peripheral" countries - Greece, Ireland, Italy, Portugal and Spain - from the eurozone.
Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns. his represents as much as 10% of the credit in the financial system.
"We find that a Greek exit could be manageable ... but in a peripheral exit, few of the large listed eurozone banks would be left standing," the Credit Suisse report said.
The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts - a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically - happen at once.
The UK's banks will not escape unscathed, although they are better insulated than those in the eurozone. In the event that the peripheral countries leave the eurozone, Barclays faces losses of €37bn and bailed out Royal Bank of Scotland some €26bn.
If only Greece were to leave the single currency, the Credit Suisse analysts calculate that losses for Europe's banks would be limited to some 5% of the stock market value of banks across the eurozone with French banks and investment banks being hit hardest. Credit Agricole would be worst effected by a Greek exit.
The Credit Suisse analysts insist they are not expecting the euro area to break up - or for Greece to leave - but they believe it is likely there will be a dramatic reduction in cross-border business - leading to less loans for businesses and individuals. The International Monetary Fund has estimated that some €2tn of credit could be lost through a eurozone break up and the Credit Suisse analysts point out they have only analysed the impact on banks they research.
Ratings agency Fitch also estimated the impact of a Greek exit from the eurozone. While the direct impact would be minimal, Fitch warned that "the indirect impact of a Greek redenomination on banks throughout the eurozone could be severe".
"A robust response from policymakers would be required to prevent contagion, and Fitch would expect a strong public statement of commitment by the European Central Bank and eurozone policymakers to provide support, if required," Fitch said.
"Banks in Portugal and Ireland are more vulnerable to contagion risks as these nations could be perceived 'next in line' for a euro exit. If the EU policy response fails to control contagion risks and if bank runs and capital flight were to become a reality, banks in these countries would be under severe stress," it said.
The Credit Suisse analysts said that banks have been preparing for a potential Greek exit so the impact would be limited, so long as "it is an orderly event".
But if there is an exit of the five countries in the periphery the the consequences for the banks in those countries would be substantial"with some of them having their tangible equity largely wiped out". Among those which would fall into this category are Intesa Sanpaolo in Italy.
The Gurdian
No comments:
Post a Comment