Friday, June 24, 2011

Eurozone Crisis 'The Biggest Threat To UK'

Debt crises in eurozone countries pose the biggest current threat to the financial stability of the UK, a new regulator has warned.

The risk is "material and immediate", according to the Financial Policy Committee (FPC), which was set up in February to monitor the health of the UK's financial sector.

Newly knighted Bank of England governor Sir Mervyn King, who chairs the FPC, said there was "no reason to be worried" about UK banks' direct lending to struggling eurozone nations.

But he warned that indirect exposure and a generalised loss of investor confidence could cause bigger problems for Britain.

"Experience has shown that contagion has spread through financial markets, especially when there is uncertainty about the precise location of exposure," Sir Mervyn said. (read more)