Signs are emerging that a run on French banks may be brewing, says Mohamed El-Erian, CEO of Pimco, the world's largest bond fund.
Talk that banks are not trading with their French counterparts, banking equity prices running at 50 percent of book value, and of CEOs going around the world looking for cash indicate a possible run on the banks, which are exposed to debt-ridden Greece, El-Erian writes in the Financial Times.
"These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to de-lever their balance sheets in a very drastic and disorderly fashion," El-Erian says.
(Associated Press photo)
"Retail depositors would get edgy and be tempted to follow trading and institutional clients through the exit doors. Europe would thus be thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession, and significantly worsens the outlook for the global economy."
French banks have invested in Greece, which is struggling not to default and abandon the euro.
A Greek default could spark on run on French banks and spread across Europe and possibly to the U.S.
Greek officials say they remain committed to sticking with the eurozone.
"Greece is and will forever be a member of the eurozone," says Finance Minister Evangelos Venizelos, according to the AFP newswire.
"We will do anything, we will not place at risk the fate of the country and its place in the eurozone."
© 2015 Newsmax Finance. All rights reserved.