Eurozone Crisis: Banking Sector Could Be ‘Wiped Out’ if Weakest Nations Leave
Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) lossif the euro crisis results in the single currency bloc breaking apart, according to one of the first indepth analyses of what might happen if the eurozone disintegrates.
The analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the “peripheral” countries - Greece, Ireland, Italy, Portugal and Spain - from the eurozone.
Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns. his represents as much as 10% of the credit in the financial system.
“We find that a Greek exit could be manageable … but in a peripheral exit, few of the large listed eurozone banks would be left standing,” the Credit Suisse report said.
The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts - a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically - happen at once.