Banks Cut Exposure to Europe’s Debt Woes

New York Times
December 12, 2010

Banks around the world have substantially cut their exposure to Greece, Ireland and other troubled countries, according to a report released Sunday, which could ease fears that sovereign debt woes in Europe will provoke another banking crisis.

But the data, from the Bank for International Settlements, which acts as the clearinghouse for central banks around the world, could also raise questions about how much of the damaged assets have simply been soaked up by the European Central Bank.

Since the E.C.B. began intervening in bond markets in May, traders say, banks and other institutions have taken the opportunity to dispose of their holdings of debt from Greece, Ireland and Portugal.

In its quarterly report, the Bank for International Settlements said foreign banks’ exposure to government debt in Greece, Ireland, Portugal and Spain fell by $44 billion, or 14 percent, in the three months through June, compared with the previous quarter, adjusting for currency effects.

More