December 2, 2011
By Sky News
Britain’s biggest banks have been urged by the City regulator to prepare for a break-up of the eurozone.
The head of the Financial Services Authority (FSA), Hector Sants, has told financial institutions to accelerate plans for a separation of the single currency area, Sky’s City editor Mark Kleinman has learned.
Senior excutives from Barclays, HSBC, Lloyds Banking Group, RBS, Santander UK and Standard Chartered were given the warning at a private meeting with the FSA boss.
Although the meeting was not specifically set to issue the warning, Mr Sants said the banks should run a wide range of stress tests as part of their contingency planning.
However, he stopped short of prescribing specific instructions or scenarios.
People close to the FSA told Kleinman that Sants’ warning was “the kind of contingency planning expected in a situation like this”.
The impact on different banks of a eurozone break-up would vary, depending on their exposures to sovereign debt of member countries.
Where as Barclays holds billions of pounds worth of European government bonds, Santander UK and Standard Chartered have little direct exposure.
Speaking on Jeff Randall Live with Joel Hills, Standard Chartered chief economist Dr Gerard Lyons warned that he does not forsee the single currency being able to survive the crisis in its current format.
He said: “It’s possible for the euro to survive if Greece has an orderly exit, which I think is possible in the second half of next year.
“But it’s like most things, one needs to have a vision as to what follows.