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Half of German loans to Spain are to its banks

Source: Reuters - Sun 12th Dec 2010

Almost half of German banks' lending to Spain is to the country's banks whereas most of their lending to Greece is to the public sector, according to a rare breakdown of international lending data.

The data released on Sunday by the Bank for International Settlements gives a key insight into whether a country's bank loans to Greece, Ireland, Portugal and Spain are to the public sector, banks or other private sector companies.

Worries about the exposure of banks to peripheral euro-zone countries have spooked investors in the last month, after a debt and banking crisis spread from Greece to Ireland, requiring massive international rescue packages.

Fears have mounted that the crisis will spread to Portugal and Spain, lifting the cost for each country to raise funds.

British banks had $131.6 billion of outstanding loans to Ireland at the end of June, which included $31.1 billion to banks and $97 billion to other private companies.

French banks had $57.3 billion of loans to Greece, including $38.7 billion to non-bank private companies and $17.8 billion to the public sector. German banks lent $36.8 billion to Greece, including $22.6 billion to the public sector.

The BIS data showed German banks had $181.6 billion of loans to Spain at the end of June, including $81.1 billion to its banks and $74.4 billion to other private companies. Almost two-thirds of UK bank loans of $104.7 billion to Spain were to non-bank private firms.

BIS data are the best indication of cross-border bank lending and have shown how interconnected lending across Europe is.

In its latest quarterly review, BIS said banks cut lending to Europe during the second quarter, in contrast to increased lending to Asia, especially China and India.

Lending to Greece, Ireland, Portugal and Spain fell by $107 billion, assuming that all lending was in euros, BIS said. Lending to the public sectors of the four countries fell by $44 billion and loans to banks dropped by $43 billion.

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