BoE warns banks to build reserves
(25 June 2010 – UK) The Bank of England has issued a warning to the nation’s banks to stock up their reserves, highlighting that the eurozone debt crisis could be a threat to the British financial system.
The central bank applauded the European Union and International Monetary Fund’s €750 billion (A$1.07 trillion) stabilisation fund, created to keep the euro afloat after markets dived as a result of Greece’s debt problems, in its Financial Stability report.
However the BoE warned that continuing market pressures could affect Britain’s financial system.
The IMF and European authorities put in place a substantial package of support, the central bank said.
While these measures helped to stabilise conditions, market pressures have not yet abated, the bank continued.
Despite Britain not being a member of the 16-nation eurozone, the BoE said the exposure of the country's financial system to institutions caught up in the currency crisis was a major danger.
The report produced twice yearly also noted that the risk to the British financial system existed when dealing with European banks that have direct exposures to countries facing increased sovereign risks.
The report also outlined fears that investors could back off endangering banks' ability to renew billions of pounds in existing funding.
The BoE welcomed banks' efforts to increase their capital, which it attributed to helped weather recent tensions.
They will need over time to build larger buffers of capital and liquidity to meet more demanding future regulatory requirements, the bank added.
However the BoE warned that continuing market pressures could affect Britain’s financial system.
The IMF and European authorities put in place a substantial package of support, the central bank said.
While these measures helped to stabilise conditions, market pressures have not yet abated, the bank continued.
Despite Britain not being a member of the 16-nation eurozone, the BoE said the exposure of the country's financial system to institutions caught up in the currency crisis was a major danger.
The report produced twice yearly also noted that the risk to the British financial system existed when dealing with European banks that have direct exposures to countries facing increased sovereign risks.
The report also outlined fears that investors could back off endangering banks' ability to renew billions of pounds in existing funding.
The BoE welcomed banks' efforts to increase their capital, which it attributed to helped weather recent tensions.
They will need over time to build larger buffers of capital and liquidity to meet more demanding future regulatory requirements, the bank added.
Subscribe