FRANKFURT (Reuters) – German banks lent the most to Icelandic borrowers and were owed $21 billion before the recent financial storm swept markets, according to figures released by the Bank for International Settlements.
The research shows that German banks, as well as handing out almost one third of loans in the Nordic outpost, are the most exposed to some of Europe’s fragile economies, such as Spain and Ireland.
In a snapshot taken at the end of June, Germany’s banks lent far more in crisis-stricken Iceland than had rivals in Britain, who were owed just $4 billion, or Iceland’s neighbor Sweden with less than $400 million.
Despite being Europe’s biggest economy, Germany’s levels of lending to countries such as Iceland are disproportionately high.
And in the week that Berlin launched a rescue plan for its banks, the first signs were emerging that lending at the height of the Icelandic bubble had come back to haunt Germany.
BayernLB, a state-backed regional lender that was the first to seek government help this week, said it expected to write off 800 million euros ($1.03 billion) of its 1.5 billion euro exposure to the tiny island state.
German banks have also been active in other booming economies which have hit the rocks such as Ireland, a country hit by recession after a property price bubble burst.
German banks lent $240 billion to Ireland, again the most globally and slightly more than its biggest neighbor, Britain.
One reason that this figure is unusually high could be due to the off-shore investment companies that many German banks set up in the country’s capital, Dublin.
German banks were also most active in Spain, lending $310 billion , significantly more than French banks which were owed about $200 billion, and roughly twice as much as British banks.
For BIS lending data click on: here
By John O’Donnell
Thu Oct 23, 2008 6:46am EDT