Turkey Crisis: How Exposed are Europe's Banks?

European bank shares have slumped as investors fear exposure to the Turkish financial crisis - Morningstar analysts look at whether these fears are justified

Morningstar Analysts 6 September, 2018 | 12:35PM
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Turkish Lira

Shares in Europe's biggest banks have weakened since the start of the Turkey crisis as investors fear that their exposure will lead to big losses. Many of these EU banks have affiliates in Turkey, a country facing spiralling inflation, a plunge in the currency, a surge in the current account deficit and tariffs imposed by the US.

The Turkish lira has lost more than half its value over the course of 2018, with the bulk of the decline occurring since the beginning of August. The decline in the value of the currency reflects concerns over Turkey's ever-growing current account deficit, combined with its heavy reliance on foreign-currency denominated lending.

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