February 9, 2010 / 10:32 PM / 10 years ago

US banks have $176 bln exposure to Greece, others

NEW YORK, Feb 9 (Reuters) - U.S. banks have $176 billion in exposure to Greece, Ireland, Portugal and Spain, with risks concentrated among the 10 largest U.S. banks, Barclays Capital said on Tuesday.

The total exposures to these nations, however, comprises only around 5 percent of the total foreign exposure of U.S. banks, Barclays analysts Jonathan Glionna and Miguel Crivelli said in a report.

Exposures to Greece and Portugal comprise less than 1 percent of cross-border exposures, they said. The data is based on a lending survey by the Federal Financial Institutions Examinations Council (FFIEC), and includes cross border claims, derivatives and foreign office claims on local residents.

Concern about sovereign debt has increased on worries that Greece will need a bailout to avoid a debt default. Click on [ID:nLDE60R2R7] for full coverage of Greece’s fiscal woes.

“Lately this has affected bank spreads, which remain volatile and sensitive to broad market risk tolerance,” Barclays said. “We believe sovereign risk has supplanted regulatory risk as the primary focus of bank bondholders.”

Credit default swaps on bank debt have increased in recent weeks, in line with rising concerns over sovereign debt risk.

For example, the cost of credit default swaps insuring JPMorgan’s (JPM.N) debt have risen to around 78.5 basis points, or $78,5000 per year for five years to insure $10 million in debt, from 47 basis points at the beginning of the year, according to Markit intraday.

The FFIEC data shows that 10 U.S. banks — Bank of America (BAC.N), Citigroup (C.N), JPMorgan, Wells Fargo (WFC.N), Bank of New York (BK.N), State Street (STT.N), Goldman Sachs (GS.N), Morgan Stanley (MS.N) and the U.S. branches of Deutsche Bank (DBKGn.DE) and HSBC (HSBA.L) — hold 96 percent of the risk, Barclays said.

The banks have $86 billion in exposure to Ireland, $68 billion to Spain, $18 billion to Greece and $9 billion to Portugal, Barclays said. (Reporting by Karen Brettell; Editing by Leslie Adler)

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