Financial Times
November 24, 2011
UK banks should be making “contingency plans” in case the eurozone collapses and must continue to reduce their reliance on short term funding and risky assets, the top UK banking supervisor has urged.
Andrew Bailey, director of banking at the Financial Services Authority, was careful to say that he was not predicting a crisis but he told an audience in London: “We are very keen to see that the banks plan for any disorderly consequences of the euro-area crisis. Good risk management means planning for unlikely but severe scenarios.”
Mr Bailey said events in Europe have also proved the UK was correct to push for its world-first liquidity standards, which require banks to hold enough easy to sell assets to withstand a market crisis or funding squeeze. UK bankers have complained bitterly about having to meet the standards right now because the global version, which is part of the Basel III reform package, does not become mandatory until 2015.
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