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Increased readiness by the ECB for Turkey - The risks to Greece

The ECB's mechanisms and the staff of the major European banks have been placed in "enhanced vigilance", as the Turkish crisis is undergoing a new phase of accelerating, with unpredictable consequences.

The devaluation of Turkey's sovereign debt by S & P and Moody's on Friday, comments for independence of the institutions, and especially of Turkey's Central Bank, the warning for further degradation deeper into the "trash" category, the slump of the lira "closing" of the week, President Erdogan's rhetoric, create the conditions for a "crash" with the opening of markets on Monday, and beyond the implications for Turkey itself, the calculations of the risk of the diffusion of the crisis have begun.

"The situation is manageable," European banking sources said, but before the tensions escalated and no one can assure that Turkey is still not a "systemic risk" for the European banking system, as sources argued in the middle of last week. The figures also show that the staff of the European banks have every reason to be on standby.

According to the latest data from the International Settlement Bank, the exposure of the major European banks to Turkey can not be neglected:

    French: $ 38.4 billion
German: $ 17.1 billion
Italian: $ 16.9 billion
Spanish: $ 82.3 billion

 As S & P says on the issue of downgrading, the continued downgrading of the Turkish lira would make it more difficult for businesses to service corporate foreign currency loans, equivalent to 25% of the country's GDP, and the refinancing burden of the loans in national currency at an interest rate of more than 20%. Moreover, the continued weakening of the pound is jeopardizing the capital levels and the quality of banks' assets.

Is there any cause for concern for Greek banks? With an exposure of just EUR 130 million, the first answer would be "no". However, the dangers of the crisis are visible, as potential bouts of turbulence in the interbank market, where Greek banks expect to get liquidity from now on due to the loss of waiver, will cause problems.