Eurozone debt crisis `most serious and immediate` threat to UK
Baku, June 25 (AZERTAC). The debt crisis enveloping the eurozone is "the most serious and immediate" threat to the British economy, according to the first report from the UK`s Financial Policy Committee.
Sir Mervyn King, Governor of the Bank of England and one of the founder members of the Committee, said the worsening financial problems of several European countries risked damaging British banks, even if they had little or no exposure to their indebted economies.
"Experience has shown that contagion can spread through financial markets especially when there is uncertainty about the precise location of exposures.
"A UK bank could have lent to a bank that itself had lent to a bank in turn was exposed to sovereign risk," said Sir Mervyn.
In a wide-ranging 50-page report, the FPC was clear that the Greek debt crisis could spread and risked hurting the euro`s largest members, France and Germany, in turn setting off a wider crisis that risked embroiling the UK financial system.
While British banks have little direct exposure to Greece their combined lending to France and Germany is equal to about 130pc of their total core Tier 1 capital and of this about half represents lending to French and German banks that were among the biggest lenders to peripheral eurozone countries like Greece.
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