Which Currency Has the Most Exposure to Ireland?

11/25/2010 12:01 am EST

Focus: FOREX

Kathy Lien

Managing Director and Co-Founder BKForex LLC, BK Asset Management

Over the weekend, the UK announced that they are willing to offer Ireland a direct loan of GBP 7 billion. With a large budget deficit of its own and the prospect of austerity measures expected to dampen growth, many critics have wondered if the UK government’s proactive offer is in the country’s best interests. Unfortunately, the answer is yes because UK banks are heavily exposed to Irish banks. As BoE Governor Mervyn King pointed out last week, their exposure is “By no means trivial.”

While “The direct holdings of Irish sovereign debt are not especially large,” the ownership “of securities issued by Irish banks are bigger and of course there are wider exposures to assets comprising loans to the Irish economy more generally.” Of all the major countries, the UK has the biggest bank exposure to Ireland, followed by Germany. To prevent a banking crisis of their own, the UK government felt the need to step up and provide support to Ireland before is too late.

The Guardian has some wonderful charts and tables detailing the exposure of various countries. It is definitely worth a look. Here is sample. Click the above link to access their full data blog on which countries are most exposed to Ireland and who will be next.

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By Kathy Lien of KathyLien.com
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