Here’s how much Austrian banks are on the sovereign debt hook for

According to Austrian newspaper Der Standard, Austrian banks had 18.1 billion euros of exposure to foreign sovereign debt at the end of October. The debt to which the banks were most exposed was Polish, Italian, German and Hungarian sovereign debt.

This makes Austrian banks doubly exposed to Hungary and Poland as the banks also have significant private lending exposure in those countries as well. I see this as a major factor in worries about Austria’s sovereign credit.

The paper says Austrian banks have little exposure in Greece and Ireland. However, if you look at these exposures based on GDP weighting, the Austrian banks are very heavily exposed to Poland and Hungary and Greek exposure is also not small in my view given the near certainty of at least a 75% NPV loss on Greek sovereign bonds.

Some exact sums:

  • Poland: 2.837 billion euros
  • Hungary: 2.821 billion euros
  • Germany: 2.289 billion euros
  • Greece: 736 million euros
  • Spain: 450 million euros

The two largest Austrian banks are Erste Bank and Bank Austria, which is a subsidiary of Italy’s UniCredit. In total, the foreign liabilities of Austrian banks are 126% of GDP. See a list of the largest European banks from the initial 2010 stress tests here.

UPDATE: a separate article from Der Standard has just come out quoting the World Bank calling Austrian bank exposure to Eastern and Southern Europe a “besorgniserregende Entwicklung”, in English, a worrying development. That’s bureaucratic speak for so overexposed it will lead to insolvency in the event of a default.

“Österreichische Banken wurden von nationalen Regulatoren empfohlen, ihre zukünftige Kreditvergabe für regionale Tochtergesellschaften zu limitieren”.

That translates as Austrian banks have been advised by national regulators to limit future lending by regional subsidiaries. This lending limit will restrict growth in places like Bosnia-Herzegovnia and Romania where Austrian banks are active and that were mentioned by name in Der Standard’s account, making the austerity measures in Romania even more unpopular.

Source: Der Standard

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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.