Hungary Was Just Downgraded, And The Ramifications Could Be Gigantic

Hungary Riot

Hungary was downgraded today by Moody’s to Baa1, a two notch downgrade, bringing the country close to a junk rating. 

The downgrade shouldn’t come as a surprise to anyone monitoring the situation in Hungary. The country has a series of problems that aren’t going away anytime soon:

  • The government is trying to patch together a plan to cut its deficit, but has found it difficult to do so.
  • The country is at odds with the IMF, which is refusing to supply more funding, until it pushes through more austerity measures. 
  • Many Hungarians took out bank loans in foreign currencies, like the euro and Swiss Franc, and are now struggling to repay them.
  • CDS prices on Hungarian debt have now surged to over 370 bps (via Markit).

The downgrade certainly isn’t a surprise, but it’s a worrying sign for many of Europe’s banks. A report from BNP Paribas from earlier this year pointed out the exposures of other European countries to Hungary, and banks’ exposures too.

Things do not look good for Austria, among other places.

Spain: Bank claims of $1.2 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Japan: Bank claims of $1.7 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

UK: Bank claims of $2.1 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Netherlands: Bank claims of $3.5 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

France: Bank claims of $11.1 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Speculation, French exposed bank: Societe Generale

CEO: Frederic Oudea

Speculation: Societe Generale owns 60% of Komercni Banka, a Czech bank with significant exposure to the Hungarian market.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Belgium: Bank claims of $17.2 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Exposed Belgiun Bank: K&H, with total assets of $11.3 billion

CEO: Jan Vanhevel

K&H is majority owned by KBC, the Belgium based bank.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Italy: Bank claims of $25 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Exposed Italian Bank: CIB, with total assets of $10.2 billion

CEO: Corrado Passera

CIB is majority owned by Intesa SanPaolo, based in Turin, Italy.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Italian exposed bank: Unicredit, with total assets of $4.2 billion

CEO: Alessandro Profumo

Unicredit is a Milan, Italy based bank.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Germany: Bank claims of $31.9 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Exposed German Bank: MKB, with total assets of $11.5 billion

CEO: Gerd Haeusler

MKB is majority owned by Bayerische Landesbank, the Munich, Germany based bank.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Austria: Bank claims of $37 billion

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Exposed Austrian Bank: Erste Bank, with total assets of $10.7 billion

CEO: Andreas Treichl

Erste Bank is majority owned by The Erste Foundation, and partially owned by Spain's Caixa.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

Exposed Austrian Bank: Raiffeisen, with total assets of $8.8 billion

CEO: Herbert Stepic

Raffeisen Bank is a Vienna based Austrian bank.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

American exposed bank: Budapest Bank, with assets of $3.4 billion

CEO: Jeff Immelt

GE is the majority owner of Budapest Bank.

Note: Data as of December 2009

Source: BNP Paribas via FT Alphaville

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