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.
If Russian oil giant Rosneft's request for $49 billion from the government is not met, Russia could face larger budgetary and revenue problems, say experts
China launched the first stage of an Asian development bank, in what is widely seen as a challenge to U.S.-backed international banks.
Aid agencies are tentatively also giving away cash and letting refugees decide for themselves what they need. The money is being wisely spent and rarely wasted
The research firm IHS estimated this week that ISIL militants were producing about $2 million worth of crude oil a day before recent U.S.-led air strikes.
The conflict between Turkish and Greek Cypriots on the island continues over the ownership of the hydrocarbon reserves in the exclusive economic zones off the shore of the island
Aeroplane maker company Boeing sells plane parts to Iran, as part of easing the sanctions and first step since 1979
OPEC's second-largest producer, Iran is normally among the first members of the oil producers' group to call for supply cuts to support prices.
The 21-member Asia-Pacific Economic Cooperation (APEC) bloc said they would advance structural reforms to unleash new sources of growth.
Ukraine needs to pay its previous debt to Russia by the end of the year and pay in advance for getting new volumes of natural gas
The loss of Khafji's 280,000 barrels per day of Arabian Heavy crude will be felt more in Kuwait, which has far less spare output than its neighbour
Under Lufthansa's proposals, pilots would still be able to retire early, but the age would gradually increase to 60 from 55.
Labor tension on the rise as high inflation reduces spending power.
Third quarter growth was lowest in more than five years, threatening annual target
De Margerie was killed when a business jet collided with a snow plough during takeoff at Moscow's Vnukovo International Airport overnight, the company and airport officials said.
Stabilised political and security situation, the launch of government initiatives toward fiscal consolidation and strong support from external donors are some of the reasons given for improved economic outlook.