Citigroup analysts said that the Greek crisis is not likely to have the same impact on the U.S. financial system as the U.S. mortgage debacle had on European economic activity.

Analysts said that the U.S. financial system and economy should handle the shock much better than the European economy did after the Lehman Brothers bankruptcy because U.S. banks have less external exposure compared to European banks and are better capitalized.

"The main source of global contagion in the financial crisis post Lehman was, of course, the financial linkages," wrote Citigroup analysts in a note published today. "A number of European banks held U.S.-originated mortgage debt and as the performance of these securities deteriorated, these banks faced funding and ultimately capital problems. The reverse contagion risk is smaller i.e. US banks are less exposed to Euro peripheral sovereign risk than Euro area banks were to the US housing market."

The overall foreign exposure of U.S. banks’ loan and securities portfolios is only about 13% and the current exposure of U.S. banks to the four most vulnerable European peripheral countries —Greece, Ireland, Portugal and Spain — is even smaller or is at at less-than 2% of the asset base.

European banks have a much larger foreign exposure (33%) and, particularly, had a 12% exposure to U.S.-originated assets at the beginning of the financial crisis.

Citi analysts said that U.S. banks are also better capitalized today relative to the situation of European banks at the beginning of the financial crisis.

"The IMF estimated that the Euro area banks had Tier 1 capital to risk weighted assets ratio (Tier1/RWA ratio) of about 7.3% at the end of 2008," analysts said. "In contrast, the U.S. banking system today is sitting at a comfortable Tier 1/RWA ratio of 11.5%; capital ratios were helped by significant capital raising after the Fed’s stress tests in April 2009 as well as general improvement in capital market conditions."

However, an area where the story could get ugly is derivative exposure. Sovereigns generally do not post margin on OTC contracts and it is likely that all large, global banks have receivables outstanding against the sovereigns, analysts said.

"It is likely that U.S. banks, which have significant derivatives operations globally could be quite exposed to sovereign default risk through this mechanism," they said.

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