The Italian thingie

Hmm, this number looks suspiciously low:

British banks have more than £42?billion of outstanding loans to Italy, including almost £10?billion to the government.

Although maybe not actually.

Most Italian government debt is actually owed to Italian households.

Say Italy does default, there\’s a 50% haircut (rather higher than I think there would be if it did BTW) so the UK banks would lose £21 billion.

An amount that hurts, certainly, but not one that would bankrupt the system. Especially if it takes a year or so to actually happen and thus provisions can be phased in.

The French banks on the other hand…….

4 comments on “The Italian thingie

  1. Tim, two things: (1) if the Italian government defaults, but they stay in the Euro, then loans to Italian companies will not necessary default; (2) UK banks will have already written down their Italian government debt by 50%, I believe

    Dan

  2. UK banks have written down Italian debt by 50%? Really? I’d be surprised.

    The fact about 50% of Italian debt is owned by Italians (not households, but banks and households) seems entirely lost on most of the economic commentators.

  3. “The French banks on the other hand……”

    So the British Banks’exposure should have their exposure to French banks added on, surely?

  4. Is that not the real point? UK banks may not have much direct exposure to any single risk but they surely have a lot of of exposure to those who have exposure to those risks?. Credit Anstalt (sic) was the first domino in the 1931 line-up. Who, where and what is the pattern of todays dominos as they affect us?.

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