BOE urges UK banks to strengthen reserves
Source: Agencies |
December 2, 2011, Friday
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Print Edition
Print Edition
The Bank of England urged British banks to build up their capital reserves, perhaps by cutting dividends or raising more cash from shareholders, to shore up their defenses against a deepening crisis in the 17-nation eurozone.
The BOE's governor, Mervyn King, stressed that it was not calling for increasing capital ratios, which have already been raised by regulators following the banking crisis which erupted four years ago.
"Where there are opportunities to boost capital, take them," King said at a news conference introducing the central bank's latest Financial Stability Report.
The report pointed to sovereign debt and banking risks in the euro area as the most significant and immediate threat to Britain's financial stability.
UK banks do not have large exposures to national debts of the euro nations but they are more exposed to private sectors in some weaker economies and have "significant exposures to major European banking systems, which in turn are highly exposed to weaker euro-area economies."
The BOE, the government and the Financial Services Authority were engaged in planning for a wide range of possible financial crisis which could affect the nation, King said. However, he ducked questions about the possible break up of the euro.
"There are many ways in which the future could play out. Maybe it won't break up, maybe it will continue in various forms, but maybe there will still be questions of default," King said.
"None of us really know and I don't think it makes sense to say that there is a single well-defined event against which we have to make contingencies."
The goal of the Financial Policy Committee, which produced yesterday's report, "is to insure as far as possible we make the UK financial system resilient so that from whichever direction the storms come - and maybe they will come from outside the euro area - that we have as resilient a banking system as we can put in place."
The BOE's governor, Mervyn King, stressed that it was not calling for increasing capital ratios, which have already been raised by regulators following the banking crisis which erupted four years ago.
"Where there are opportunities to boost capital, take them," King said at a news conference introducing the central bank's latest Financial Stability Report.
The report pointed to sovereign debt and banking risks in the euro area as the most significant and immediate threat to Britain's financial stability.
UK banks do not have large exposures to national debts of the euro nations but they are more exposed to private sectors in some weaker economies and have "significant exposures to major European banking systems, which in turn are highly exposed to weaker euro-area economies."
The BOE, the government and the Financial Services Authority were engaged in planning for a wide range of possible financial crisis which could affect the nation, King said. However, he ducked questions about the possible break up of the euro.
"There are many ways in which the future could play out. Maybe it won't break up, maybe it will continue in various forms, but maybe there will still be questions of default," King said.
"None of us really know and I don't think it makes sense to say that there is a single well-defined event against which we have to make contingencies."
The goal of the Financial Policy Committee, which produced yesterday's report, "is to insure as far as possible we make the UK financial system resilient so that from whichever direction the storms come - and maybe they will come from outside the euro area - that we have as resilient a banking system as we can put in place."
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