European banks face €108bn hole if UK leaves Europe
Bloomberg reports that European banks would have to cover some €108bn securities if the UK votes to leave Europe. Under Basel rules a UK exit would make some UK securities ineligible to be held as emergency cash reserves.
The article is typical of most Brexit stories and is full of could do's and maybe's but at least there is one voice of reason, and it's the most pertinent;
"Even if there is a vote to leave, the U.K. will remain in the EU for some time to come because the process of withdrawal isn't going to happen overnight. If you're a European bank holding some U.K. securitization paper that you're counting toward your LCR, it's not the case that you would have to sell it the day after the vote." said George Gooderham, a capital markets lawyer at Linklaters LLP
That's the key point in the event of an exit but that won't stop the panic merchants from hitting the sell button on everything with a 'Made in the UK' sticker on it. I'm not saying a vote to leave isn't bad news but that we're bound to see an massive overreaction. This story also highlights the fear that is constantly being peddled around the issue and that's going to help keep the quid and UK assets on the back foot in the run up.