Financial regulator ‘urges British banks to prepare for the collapse of the euro’
Financial powerhouses told to ‘accelerate contingency plans’ for breakdown of single currency
Global businesses admit they are already looking at plans in case the eurozone fails
By Hugo Duncan and Charles Walford
30th November 2011
British banks must brace themselves for the chaotic break-up of the euro, the City watchdog has warned.
The head of the Financial Services Authority told the UK’s biggest lenders to draw up contingency plans for the collapse of the single currency.
Hector Sants, who is in charge of regulating the banking system, gave the order during crisis talks with senior executives from high street players including Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander.
City sources said big insurance companies were also urged to prepare for the exit of one or more countries from the eurozone.
It is feared that the meltdown of the 17-nation club would wreak havoc in the UK financial system because of the network of relationships between British and European banks.
Andrew Bailey, a senior executive at the FSA, last week said: ‘We must not ignore the prospect of the disorderly departure of some countries from the eurozone.’
Latest figures showed that UK banks had £290 billion tied up in European banks at the end of June including £100 billion in the so-called PIIGS of Portugal, Ireland, Italy, Greece, Portugal and Spain.
However, they have been pulling out of the eurozone in recent weeks as the debt crisis escalates in an effort to shield themselves from the storm.
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The warning comes after it emerged multinational companies are also drawing up contingency plans in preparation for the possible break-up of the eurozone.
Senior executives at a number of leading global conglomerates have hinted that they can no longer assume that political leaders will be able to save the single currency.
Carmakers, consumer goods companies and energy firms are among those increasingly placing cash reserves in safe investments to minimise their risk.
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