Crisis in Europe

Ambrose Evans-Pritchard of the Telegraph reports on problems faced by European Banks.

The region’s banks were coming under severe stress as the property bust combines with a rising debt burden. “Local currency depreciation is a major risk to East Europe banks.

There are contagion worries for Western banks that have lent $1.74 trillion to the ex-Soviet bloc -- split between $1 trillion in foreign loans and $700bn in local currency debt through subsidiaries.

Austria’s banks are the most exposed with the share of risk-weighted assets tied to the region reaching 54pc for Raffeisen and 38pc for Erste Bank. The exposure of Germany’s Bayern Bank is 48pc, Italy’s UniCredit is 45pc, and Swedbank is 29pc.

The region needs to roll over $400bn in foreign debts this year, equivalent to a third of total GDP, raising concerns that it may need a massive rescue programme from the International Monetary Fund and the European institutions.

Many of these banks are also exposed to the American subprime problem.