Exposures of Foreign Banks to Euro Periphery

This post was written by Philip Lane

The same BIS Quarterly Review also carries an analysis of the holdings of foreign banks (with a geographical breakdown) in the troubled periphery of the euro area and shows the allocation between claims on the public sector, banks and the non-bank private sector: you can read it here.

As has been pointed out repeatedly on this blog, the claims on Ireland have to be treated with some caution in view of the role played by IFSC-located entities. In its coverage of this new article, the New York Times highlights the probable role of Hypo Real Estate’s subsidiary in Dublin (the former Depfa bank) in contributing to the high claims of Germany on the Irish non-public sector.

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4 Responses to “Exposures of Foreign Banks to Euro Periphery”

  1. allan harris Says:

    “Nevertheless, internationally active banks increased their exposures to
    Greece, Ireland, Portugal and Spain, mainly as a result of rising off-balance
    sheet items.” Avdjiev, Upper and Kliest.

    Translation:

    In spite of the civilization ending consequences of sovereign default, international banks lent even more money to the PIGS, mainly, however, as the result of accounting gimmicks.

  2. Brian O' Hanlon Says:

    Thanks for the quarterly review link Philip. A nice concise review piece. BOH.

  3. jules Says:

    At last is now clear on the flow of money. Basically EU based banks are the buyers of Irish bonds. A lot of this cash is flowing into Anglo black hole where the bond holders, which are also mainly the EU based banks can get their cash back out. The German banks must be very happy indeed with our Mr. Letthemhaveitall and I expect he will get a nice pat on the back and a few sweeties when he goes to see the commisioner tomorrow about his absurb plans for Anglo, the bank of follies.

  4. AMcGrath Says:

    @jules
    I suspect you are correct. There was a lot of fuss made on another (record breaking) thread about whether we could avoid burning depositors/bond holders who were guaranteed under the ELG Guarantee which the government introduced in 2009. I would have thought that since these deposits are of fairly recent vintage, there wouldn’t be a probleme since Anglo would still have them or have since made some money on them through investments which we can assume are not as risky as those made under the previous regime. But could it be that these recent deposist are being used to pay back the older bonds and deposits - i.e an elaborate neverending ponzi scheme funded out of our pockets, and the pockets of future taxpayers.

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