The impact of Japan's devastating earthquake and tsunami compounded by nuclear safety fears will clearly be felt by the banks writing Japanese letter of credit (L/C) business.

It will be some time before the true costs of the disasters to banks are measurable, but banks outside Japan as well as Japanese banks will no doubt have to shoulder additional financial burdens.

US bank exposure

US banks are thought to have around US$100 billion worth of exposure to Japan.

Of these banks, JPMorgan Chase & Co. has the largest Japanese exposure with US$53.9 billion in "cross-border outstandings," investment bankers KBW said in a 14 March research note.

According to JPMorgan's end-2010 financial disclosures, it had US$64 billion in "commitments" that included L/Cs as well as undrawn credit lines at the end of last year.

European bank exposure

UK banks have a substantially higher exposure than their US counterparts with around £136 billion exposed to Japanese risk.

European banks with high levels of exposure to Japan are thought to include the UK's Royal Bank of Scotland Group and Switzerland's UBS AG.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.