Brown Brothers Harriman strategists say global investors are increasingly paying attention to the risks stemming from Greece restructuring its debt and the possibility that this restructuring might involve lowering rates and extending maturities. One of the key issues is that what is now a sovereign crisis could become a banking crisis for Greece, "and beyond," they say. "A large haircut would wipe out Greek banks for all practical purposes and severely hurt foreign
banks," they say. BIS data suggests that foreign exposure to the sovereign debt of Greece, Ireland, and Portugal is roughly $266 billion which is "about half as much as foreign exposure to peripheral banks ($488 billion) and non-financial businesses ($100 billion) combined," the strategists say. They note that "ECB's Gonzalez-Paramo and Starkhave both recently warned that a Greek debt restructuring could trigger a Lehman-type banking crisis (or worse) in Europe."