Are the US and UK Exposed to Developing Countries?

Date February 18, 2009

A time bomb is waiting to explode in the Eurozone with Western European banks at risk of defaults on Eastern European loans. This leads me to wonder, how much isvthe US and the UK exposed to developing countries. So I compiled the following charts from the latest Bank of International Settlements data (as of September 2008).

Euro area loans to developing nations are heavily skewed towards Eastern Europe while UK lends predominately to Asia, Africa and the Middle East. The US on the other hand lends primarily to Asia and Latin America.

Default risk in Asian nations are lower than Eastern European nations, which makes the UK and US less vulnerable if a time bomb explodes in Eastern Europe.

Meanwhile USD/JPY hit a 6 week high this morning after President Obama announced a foreclosure program.

Follow the jump for Eurozone and Switzerland charts

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4 Responses to “Are the US and UK Exposed to Developing Countries?”

  1. Paul Stafford said:

    Great charts. hard to believe the size of lending from the EU-9. I thought to compare the lending with the GDP

    UK GDP 1,290B lending $4,270B, or 3.31X GDP
    US GDP $13,164B, lending $1,662B or .126X GDP
    EU GDP $10,636B, lending 15,504B or 1.45 GDP
    CHF GDP $380B, lending $2,382B or 6.26X GDP

    so it would seem that the Swiss and UK are most leveraged out there, but the risk to UK is less given the markets they’ve lent to. this might be the final nail in the coffin for CHF as a risk aversion currency.

  2. Kathy Lien said:

    You are absolutely right Paul, definitely an important way of looking at it!

  3. Carmen said:

    Paul, mind to elaborate more on “this might be the final nail in the conffin for CHF…..”?

  4. Yohay said:

    Thanks for the interesting charts!

    Paul’s remark also helps here. I’ll try to explain to Carmen:
    The Swiss Franc used to be a solid currency that is bought in times of trouble. In the current crisis, USD and JPY are the “haven” currencies. With the high exposure of Swiss banks to Eastern Europe, more than 6 times its GDP, the CHF is in danger. It is in such a danger, that it might collapse in times of trouble, ending its tradition as a risk aversion \ safe haven currency.

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