France's big banks, already punished for having the biggest exposure to Greece, have been hit for being the most exposed to Italy, the eurozone's biggest borrower. The shares of BNP Paribas, which owns Banca Nazionale del Lavoro, have slipped by 14 per cent since July 1.
At first glance, as with the Greece-induced sell-off, investors’ Italian hatchet job seems disproportionate. It certainly cannot explain the 15 per cent price fall in Société Générale, which has no retail network in Italy. At the last count, Crédit Agricole’s €10.1bn exposure to Italian sovereign debt represented 0.55 per cent of its balance sheet; BNP Paribas’s equivalent exposure was €22bn; and SocGen’s a modest €2.4bn. Looked at another way though, Bank for International Settlements data show that French lenders’ $389bn (€276bn) of Italian risk accounts for more than a third of total foreign bank exposure to Italy. That is almost an order of magnitude greater than their $53bn (€38bn) of Greek risk.
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