Lending into Ireland fell 15pc during bailout crux
BIS data shows German banks largest holder of Greek bonds
Published 07/06/2011 | 05:00
IRELAND saw the biggest fall in cross-border borrowing of any developed country in the final three months of 2010, according to the Bank for International Settlements (BIS).
The BIS co-ordinates financial regulation between central banks. It is known as the central bankers' central bank.
Figures revealed in its latest report show a 15pc collapse in lending into Ireland by global banks during the period immediately before and after the Irish bailout.
The figures include lending to the Irish Government, Irish banks and businesses and to households in Ireland.
In all, lending by international banks to Irish borrowers fell $83bn during the three-month period. Lending to Greece fell by $10bn over the same three months.
Bank of Scotland
Some of the huge Irish decline is a result of banks like Bank of Scotland (Ireland) pulling out of the country, and some may be linked to the German parents of IFSC banks moving money back to the home market or into their own bad banks.
However, it remains the case that Irish financial institutions and the Irish Government have been locked out of the money markets since the start of the period referred to in the research.
The same BIS research revealed that German banks were the biggest foreign holders of Greek government bonds.
The breakdown of who holds Greek government debt is likely to be a critical factor in whether European political leaders can convince banks to take some hit in the latest Greek bailout.
According to BIS data, German lenders had $22.7bn (€16bn) of Greek government bonds at the end of last year. The report said French banks held $15bn of Greek government bonds.
European banks held 96pc of the Greek government bonds held by banks at the end of last year, most of it in France and Germany.
In addition, the ECB holds around $50bn of the bonds, while Greek banks hold another large chunk.
There has been relatively light trading of Greek government bonds since the start of this year, so the figures are unlikely to have changed dramatically.
It means European leaders are in a position to lean on a critical block of the debt when talks on burden sharing get under way over the coming weeks.
European and IMF officials have proposed a new bailout deal for Greece that includes a role for banks who will be asked to make some form of contribution -- most likely by rolling over Greek debt.
BIS data shows French banks are actually more exposed to Greece overall, however, because they and their subsidiaries are owed another $39.6bn in lending to companies and households.
French bank Credit Agricole owns Emporiki Bank, one of the biggest lenders in Greece. German lenders have no major units in the country.
The bulk of international lending to Ireland is from banks, companies and households. Just 4pc of $462.3bn Irish borrowing is government debt. UK-based banks are the biggest lenders to Irish companies and individuals.