Revealed: The UK’s Irish risk

 
Julian Harris
Follow Julian
THREE major UK banks – RBS, Barclays and Lloyds – together havemore than €100bn (£860m) of exposure in Ireland, according to data seen by City A.M.

Morgan Stanley conducted research on the levels of exposure in the three “peripheral” Eurozone countries, Ireland, Portugal and Greece. Unsurprisingly “the largest exposures are clustered in UK banks”, the report says.

After the Irish bailout, which could still see bank creditors taking losses, such figures will be analysed ever more closely.

In total 21 listed banks hold €347bn of exposure across the three countries. Of that, €131.5bn is held by RBS, Barclays and Lloyds BG.

The exposure to sovereign risk of state-owned RBS is shown as equal to 113 per cent of the company’s Total Net Asset Value (TNVA).

The report considers both sovereign bond holdings as well as direct loan exposure.

The data lists Lloyds having no sovereign bond holdings in Ireland, and a Lloyds BG spokesperson said the bank has “no sovereign exposure to Portugal or Greece” and “minimal” sovereign risk exposure in Ireland.

The three banks with the largest Irish sovereign bond holdings are Credit Agricole (€929m), HSBC (€596m) and RBS (€385m).

In the Eurozone, Ireland (9.9 per cent), Greece (17.5 per cent) and Portugal (7.2 per cent) have the highest proportions of banking assets funded by the European Central Bank (ECB). In recent months Ireland’s level of reliance has surged upwards, resulting in ministers last night succumbing to a bailout.

The report warns that Portugal could face a similar fate. While the country’s problems are more due to “low productivity and competitiveness”, its levels of government debt to GDP are similar to Ireland’s – making it an off index investment in the eyes of many investors, according to the report.