Credit Suisse reports that European banks may have as much as $40 billion in exposure in Dubai. RBS says that getting correct numbers on Dubai is not possible but that European banks have almost $84 billion in exposure in the United Arab Emirates. According to The Wall Street Journal, RBS derived its data by "using data compiled by the Bank for International Settlements. U.K. banks have by far the largest exposure at $49.5 billion, while French and German banks top the euro-zone list with $11.3 billion and $10.2 billion respectively."
The stocks of banks have sold off significantly around the world on the heels of the news about Dubai asking for a six-month "moratorium" on debt payments. However, the shares in many banks began to come back on European exchanges as the trading day progressed.
The "see-saw" action in the pricing of banks stocks is not surprising because it is still entirely unclear whether Dubai will be able to refinance its debt, and, if so, whether big banks will be asked to take something less than face value of the sovereign bonds they hold. It may take weeks to get an answer to the question about the real status of the problem. In the meantime, buying money center bank stocks will be like going to a casino.
Douglas A. McIntyre is an editor at 24/7 Wall St.
