Here’s Who’s Really Desperate For The Eurozone Bailout To Work
Banks will be the first to fall if the PIIGS (Greece, Italy, etc.) start defaulting.
The renewal of dollar liquidity facilities and assurances from Germany that it will bail out its own banks if Greece defaults may have temporarily bolstered markets, but these announcements also signal that the prognosis for European banks is grim if Greece defaults.
So which banks will be the first to collapse?
We took a list of the largest European banks by assets and compared their market cap, common equity, and total exposure to PIIGS debt (thank you for the bank statistics, EBA!). Then we calculated exposure to PIIGS debt (sovereign and private) as a percentage of the banks’ common equity.
The worst 20 cutoff for our test ended up being exposure equal to about 175% of common equity, but it really gets out of control once you get to the PIIGS banks (#1-9).
Note that SocGen — which doesn’t quite make the cut here — would be #21.
EU banks will fail if PIIGS default and Greece renounces the Euro, both of which are increasingly likely. Here is a list of the top 20 banks that are tottering on the brink.