Greek Default Spells ‘Havoc’ for European Banks

A year after first bailout, banks still have $2 trillion linked to Portugal, Ireland, Spain and Italy on books.

A year after European officials bailed out Greece, investors say the region’s banks haven’t raised sufficient capital or cut loans enough to withstand the contagion that may follow a default.

While European lenders reduced their risk tied to Greece by 30 percent to $136.3 billion last year by not renewing loans, writing down the value of debt and shifting it off their books, they still have almost $2 trillion linked to Portugal, Ireland, Spain and Italy, figures from the Bank for International Settlements show, leaving them vulnerable if the crisis spreads.

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