Banks 'bracing themselves' for Greek default

26 September 2011

Banks across Europe are preparing themselves for the fallout of a possible Greek default.

According to Reuters, lenders are hopeful firewalls can be put up around the banking system to prevent the crisis from reaching other countries in the Eurozone.

Bankers have compared the risk of financial market contagion with the collapse of Lehman Brothers during the global economic downturn.

Vikram Pandit, chief executive officer at Citigroup - which is organised into two major segments in the form of Citicorp and Citi Holdings - said the direct financial exposure in the continent's banking network is manageable, but warned there is likely to be one almighty demand shock.

The industry figure observed: "We should all expect some sort of a GDP impact if you have a demand shock that's going to be that significant and that's going to have an impact on business."

In addition, there are fears a Greek default might result in the widespread selling of eurozone debt, which could lead to much bigger financial crisis.

By Gary Cooper

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