The words “debt” and “default” are so often uttered in connection with Greece these days that you’d think they were names of Greek gods on par with the likes of Zeus, Athena and Dionysus.
But Debt and Default are not almighty beings borne from Greek mythology. They are part of Greece’s tragic present-day reality – its Achilles’ heel, if you will.
Similar to some its mythical gods, however, Greece’s sovereign debt and looming possibility of a default inspires fear. Stock markets around the world have been held hostage by the ongoing Greek debt crisis, submitting to the fears investors have over how Greece’s financial troubles will impact stocks.
Banks all over the world are exposed to Greek debt, spurring what is becoming known as the global financial crisis. But despite the fear reflected in the near-daily fluctuations of the U.S. markets, the exposure of American banks to Greece’s considerable debt is fairly modest. European banks are the most at-risk.
The situation in Greece is escalating. With the latest bailout efforts put on hold while Greece contemplates a government restructuring, it’s important to know which banks have the most to lose if Greece does default.
Here is a list of the private banks that hold the most Greek debt, according to Forbes:
- BNP Paribas (BNP.PA): France, $7 billion
- Dexia (DEXB.BR): France, Belgium and Luxembourg, $3.5 billion
- Generali (G.MI): Italy, $4.2 billion
- Commerzbank (CBK.DE): Germany, $4 billion
- Societe Generale (GLE.PA): France, $3.8 billion
- Axa (CS.PA): France, $2.65 billion
- Deutsche Bank (DBK.DE): Germany, $2.25 billion
- HSBC Holdings (HSBA.L): England, $1.9 billion
- BPCE: France, $1.8 billion
- Royal Bank of Scotland (RBS.L): $1.6 billion
As you can tell from the list, France and Germany are the countries whose banks hold the most Greek debt. The French government, along with Belgium and Luxembourg, had to bail Dexia out just last month in order to save it from bankruptcy. Meanwhile, the German government may have to rescue Commerzbank, the country’s second-largest lender, after it reported severe third-quarter losses thanks in large part to its Greek debt holdings.
Furthermore, as part of the new debt deal proposed by European Union leaders, banks that hold Greek’s sovereign debt are being encouraged to take a 50 percent loss on their Greek holdings. That doesn’t bode well for the future of any of the banks listed above.
So, while the Greek debt crisis may seem a bit overblown here in the U.S., the daily gloom-and-doom news coming out of Europe is certainly relevant if you own stock in any of the aforementioned banks.