World Bulletin / News Desk
Britain's banks have been told to test how they would cope if several euro zone countries exited the single currency, the UK's Financial Services Authority watchdog said on Tuesday.
FSA Chairman Adair Turner said Britain's banks needed to think about problems arising from their assets and liabilities being redenominated into another currency, even though the likelihood of this happening was still small.
"We've certainly encouraged them to run those scenarios for Greece, Spain, Italy, Portugal and Ireland," Turner told parliament's Treasury Select Committee.
"I think we consider the chances very low, very very low for at least some of those countries on that list, but I think it is sensible to encourage people to run extreme risk scenarios," Turner added.
The committee was questioning Turner and Bank of England (BoE) officials who are members of the BoE's Financial Policy Committee which looks at risk affecting financial stability.
The FPC's meeting in June concluded that the euro zone debt crisis was the biggest challenge facing the UK economy, which is back in recession.
The committee agreed to help banks kick start the economy by tapping billions of pounds from their cash buffers and using the freed up money to increase lending to businesses.
The extent to which banks can cut their liquidity buffers -- mainly made up of government bonds -- will depend on how much lenders have in collateral parked at the Bank of England.
"We are working through the details on that," Turner said, adding the FSA will soon hold meetings with each bank over how much they can tap their cash buffers.
"Within a few weeks we will have sorted this out," Turner said.
The FPC is still putting pressure on banks to build up their separate capital cushions by retaining earnings, and curbing bonuses and dividends, Turner said.
"Our banks are in a much stronger position than they were three or four years ago," Turner said.
The FSA was discussing with some banks the possibility of issuing contingent capital or CoCos, a hybrid debt that converts to equity when a bank becomes stressed, Turner added.
Dollar strength and waning investor confidence are driving the lira lower
Greece has already received two bailouts totalling 240 billion euros but fellow euro zone member Ireland said last week that it would have to negotiate a third programme.
The Ukraine crisis has tested the loyalties of Bulgaria, a Balkan country with historical ties to Moscow and heavily dependent on Russian energy supplies.
Syria expels three United Nations aid workers hindering aid development in the country
Russia has overcome a "psychological barrier" and is ready to deepen its economic ties with China, Deputy Prime MinisterArkady Dvorkovich said
With Chancellor Angela Merkel's right-left coalition plus the opposition Greens, it was the biggest majority for any euro zone rescue package so far in the 631-seat chamber.
The agreement commits Tanzania, Kenya, Uganda, Rwanda and Burundi to cooperate with the United States in customs issues, ease red tape at borders, reduce customs wait times and harmonize trade standards.
Sri Lankan President Maithripala Sirisena has unnerved China with his re-examination of certain projects that Chinahas invested in, including a $1.5 billion "port city" project in Colombo.
EU energy chief Maros Sefcovic invited Russian Energy Minister Alexander Novak and his Ukrainian counterpart Volodymyr Demchyshyn for talks
Gazprom and Ukrainian state energy firm Naftogaz have accused each other of not sticking to agreements on gas supplies.
The new canal, that will allow two-way traffic of larger ships, is supposed to increase revenues by 2023 to $13 billion.
A day after euro zone finance ministers agreed to a four-month extension of a financial rescue, Finance Minister Yanis Varoufakis gave a frank assessment of Greece's financial position.
The agreement is the culmination of talks that began in September after the government decided its own solutions to its fiscal crisis were failing to convince investors.
Energy union highlights bloc's attempt to seek independency from its main gas supplier - Russia.
Merkel's right-left coalition is set to prevail, despite vocal pockets of resistance on the right and left.
Republicans passed the bill to increase pressure on Obama to approve the pipeline, a move the president said would bypass a State Department process that will determine whether the project is in the U.S. national interest.