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US banks fall as Greek talks fail, capital controls enacted

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Shares of the biggest US banks fell, led by a 2.2 per cent decline in Citigroup Inc., after talks to provide Greece with additional bailout aid failed and the Greek government imposed capital controls.

[NEW YORK] Shares of the biggest US banks fell, led by a 2.2 per cent decline in Citigroup Inc., after talks to provide Greece with additional bailout aid failed and the Greek government imposed capital controls.

The Standard & Poor's 500 Financials Index slid as much as 1.1 per cent, the biggest decline in almost seven weeks. JPMorgan Chase & Co, the largest US bank by assets, dropped 1.9 per cent and No 2 Bank of America Corp slid the same amount.

Prime Minister Alexis Tsipras called for a July 5 referendum on whether Greece should accept additional austerity demands from the country's creditors, and French President Francois Hollande said the results would determine Greece's future membership in the 19-nation euro region.

Greek banks were closed on Monday and the government imposed capital controls to avert a collapse of the nation's financial system. Greek stocks and bonds tumbled, and Europe's Stoxx 600 Banks Index fell as much as 4.4 per cent. Lenders in Italy, Portugal and Spain posted the biggest drops.

Citigroup has exposure to Greek borrowers, including loans, derivatives and securitized products, of about US$1.3 billion, as well as third-party assets and liabilities in its Greek branch of approximately US$44 million and US$481 million, respectively, according to a first-quarter regulatory filing by the New York-based company.

Jamie Forese, head of Citigroup's institutional clients group, said at an investor conference this month that the bank has reduced its exposure to Greece as much as it can while still serving its clients. The firm has also balanced its assets and liabilities to guard against a departure from the currency union, he said.

"With a little pain we'll comfortably survive something in Greece at least in its primary effects," Forese said. "The real worry that most people would probably express about Greece would be the secondary-order effects or the tertiary effects."

Bank of America, based in Charlotte, North Carolina, said in its first-quarter filing that its net exposure to Greece was US$386 million.

Goldman Sachs Group Inc's total credit exposure to Greece was $180 million, mostly with sovereign counterparties. Market exposure as of March was negative US$34 million, the company said in its first-quarter filing. The totals were down from US$1 billion in credit exposure and US$54 million in market risks as of December, Goldman Sachs said.

"You'd have to assume that the risk is much more contained given people have had years to focus on this," Goldman Sachs Chief Financial Officer Harvey Schwartz said in April.

BLOOMBERG