Turkish currency's dramatic decline has ignited fears of a "contagion" that will affect financial institutions in Europe, but it is far from inevitable.
The Turkish Lira sank to 6.88 Lira to a dollar on Monday, amid a widening currency crisis unleashed by political rhetoric and economic policies.
"There are only five European banks (BBVA, UniCredit, ING, BNP, and HSBC) in (our) coverage universe with a notable presence in and/or exposure to Turkey," Deutsche Bank (DB) analyst Jim Reid wrote in a note published on August 13. "There may be somewhat significant capital and earnings implications for the most-exposed banks, but they do not expect systemic implications and believe the impact should be broadly manageable for European banks."
Deutsche Bank's own exposure to Turkey is limited as well.
Reid's comments were echoed by Neil Smith, an analyst at Bankhaus Lampe, who noted that he felt the contagion risk was entirely confined to a number of banks with larger exposures.
If the currency crisis continues and spreads, how bad could it get for the European banks?
Two countries' banks alone maintain over $100 billion in exposures to the plummeting lira, according to the International Bank of Settlements. As the currency continues to weaken, some of the largest banks in Europe as well as in the US are potentially at risk to lose billions if the borrowers default.
Turkish borrowers owe $83.3 billion to the Spanish banks and $38.4 billion is owed to French banks, representing the two largest scale lending countries.
Spain is the largest lender in the European market, which has drawn the watchful eye of the European Central Bank.
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) controls a 49.85 percent ownership interest in Turkish bank Garanti after raising its stake in February 2017.
"The long-term growth prospects for both Garanti and Turkey continue to be very positive despite current uncertainties," BBVA CEO Carlos Torres Vila said at the time.
In France, BNP Paribas was singled out as the company maintains a 72% stake in the Economy Bank of Turkey, or Türk Ekonomi Bankası A.Ş. The bank first entered into an agreement through a joint venture which was actioned in 2005.
"[Turkish Economy Bank] is a mid-sized universal banking group, reputed for the quality and liquidity of its assets and characterized by prudence and conservative management," the company said in a statement.
Italy, while not mentioned as a comparable debtholder to Spain or France, was cited by the ECB as a country at risk due to significant Turkish debt held through UniCredit, its biggest bank. The Italian lender most notably holds a 41% interest in Yapi Kredi as part of a joint venture with Koç Group, a Turkish conglomerate.
Lastly, Dutch-based ING Groep and UK-headquartered HSBC were mentioned as significant debt holders, as both operate subsidiaries in the country.
Despite the risk for these lenders and the 3.2% drop in the Euro Banks Index, analysts are not concerned about systemic risks.
So, while the "contagion" may have significant concentrations in certain countries and risks for some banks, analysts are confident the Turkey's currency crisis is still primarily Turkey's headache.