UK Gets Ready to Handle Impacts of Greek Crisis
The Bank of England, which is currently devising plans to prevent the spread of the Greece crisis to the UK, has stated that it is ready to “take any actions required to safeguard financial stability in the UK” if Greece quits the eurozone.
The bank’s Financial Stability Report (FSR), which is released biannually, states:
As risks associated with Greece began to crystallize in recent days, the outlook had worsened.
The officials of the Treasury, the Financial Conduct Authority (FCA), and the Bank of England have been collaborating on devising plans to deal with any unforeseen events and ensure that a possible Greek exit from the eurozone does not cause any harm to the UK economy.
Governor Mark Carney said that he is in touch with Greek banks that have subsidiaries and branches in the UK, including the HSBC Bank, which is most exposed to Greek economy. He is of the opinion that the impact on UK will be limited. He said:
A series of defenses are in place and depending on how events unfold, those may be tested.
Although the banks of UK are least exposed to Greek economy, the UK will suffer the most if the Greek crisis spreads to the rest of the eurozone. However, the FSR assures that measures taken ever since the economic crisis of the 2011 will help curb the contagion.
Stating that Draghi has helped the eurozone survive the crisis, Carney said:
President Draghi and his colleagues have done the right things, they have worked very hard to continue to provide liquidity to the Greek banking system, they continue to do that.
The FSR also highlights risks such as the condition of the housing market in the UK, cybercrime, the results of financial misconduct, lack of liquidity in certain markets, and the account deficit in Britain.
The FSR also warns against loss of faith in the banking system. According to a survey conducted by the Bank of England, 75% smaller firms do not want to borrow money from banks not just because of the economic conditions, but also because they no longer trust banks.
The FSR states:
To contribute fully to prosperity, bank and market require a ‘social license’ – the consent of society to operate and innovate. That requires fairness and accountability. An erosion of trust and love of social license risks the imposition of rules or restrictions on banks and markets that are detrimental to their contribution to prosperity.
