As it became clear that radical left-wing party Syriza would win this months elections, 6bn was pulled out of the Greek banks.
When Alexis Tsipras was sworn in as new Greek Prime Minister, after forming a coalition with populist right-wing party Independent Greeks, the Athens stock exchange fell nearly 10%.
Greek banking stocks fell 25%.
Exit, Pursued By Bear Market
As the Greeks embark on do-or-die debt negotiations with the European Union, the prospect of a Greek exit, or Grexit, looks a distinct possibility.
That could spark chaos in Greece, as itsdebts spiralled after being converted into drachmas, but what will it mean for the UK banks?
After a brief mid-week dip all three banks, like the FTSE 100 as a whole, had recovered their poise by Friday.
The UK banks have minimal exposure to Greek debt. French bank Credit Agricole has most in Europe, according to a recent report by JP Morgan, along with BNP Paribas SA, Credit Agricole, Natixis, Societe Generale, Deutsche Bank and Commerzbank.
But even this is only between 0.1% and 0.9% of their loans book. Their bond holdings are immaterial JP Morgan said.
Grexit doesnt scare Europes banks.
Bad Haircut Day
The EU has been working hard to contain any contagion from a Grexit, and now has a permanent sovereign rescue fund and elements of a banking union in place.
That may encourage the troika to take a hardline stance with Syriza, because if it forgives Greek debt, then Spain, Italy and the rest of southern Europe will want forgiveness as well.
Given that the Greeks cant afford to repay their debts, default and Grexit looks baked in, possibly sooner rather than later.
The wider loss of confidence will inevitably spread tothe UK banks, but otherwise they have immunity. The big question then is what happens to the rest of Europe.
I vividly remember Black Wednesday on 16 September 1992, when Britain lost billions after being forced out of the Exchange Rate Mechanism (ERM) with Germany.
Unless Grexit is such a disaster that it terrifies Europe into accepting its current state of perma-depression forever, I believe the eurozone will eventually go way of the ERM.
The Bank of England has previously found that the big four UK banks have total exposure 578bn to Europe, equivalent to 268% of core capital.
They may have immunity to Grexit but the cantavoid contagion from a full-blown eurozone breakdown. Although if that day comes, we will have a lot more to worry about.
In troubled times, defensive blue-chips come to the fore.
The stocks listed in this special wealth creation report, top FTSE 100 stocks that could help you retire in comfort, are all ideally placed to deliver long-term wealth over the years ahead.
The Motley Fool’s 5 Shares To Retire On don’t just offer long-term growth, but juicyyields of more than 4% as well.
If you’d like to find out the identityof these five top companies, and how their shares could fuel yourretirement, simply click here now for instant access.
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.
By providing your email address, you consent to receiving further information on our goods and services and those of our business partners. To opt-out of receiving this information click here. All information provided is governed by our Privacy Statement.