Deutsche Bank analyst Jan Schildbach released a bit of research that details how European banks have significantly decreased exposure to the United States.
Prior to the financial crisis, Europe’s banks steadily expanded their presence in the US. Assets held by euro-area banks peaked in September 2007 at more than USD 1.5 tr – equivalent to 50% of all foreign bank assets in the US. Since then, this share has plummeted to 30% (USD 973 bn). German banks cut their US assets to USD 267 bn – the lowest level since December 2004.
The attached chart explains the drop in exposure to United States compared to how Canadian and Japanese banks have increased their exposure. The drop is impressive, and the gap between exposure for European banks to the United States compared to Canadian and Japanese banks is continuing to close.
Photo: Deutsche Bank
Much of the banks’ decrease in exposure is due to pressure to deleverage and focus more on domestic markets. Combined, Japanese banks and Canadian banks now have more exposure to the United States than all of the European banks.
Schildbach concludes that the drop in exposure to the United States may allow domestic banks in America to gain business at the expense of “troubled European competitors.” While European banks attempt to mitigate their overall risk, potential rewards are opening up for other nations.
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