LONDON — Britain is stepping up its contingency plans in case the eurozone breaks up, even though analysts believe that only Greece is currently at risk of departing the 17-nation bloc over the debt crisis.
A senior official at Britain's financial watchdog, the Financial Services Authority, said Thursday that Britain's banks were drawing up plans for the possible dismantling of the eurozone, but did not elaborate.
Andrew Bailey, deputy head of the FSA's prudential business unit and an executive director of the Bank of England, said banks such as HSBC and Barclays could not afford to ignore the possibility of a breakup.
"We are talking to them about it and they are doing (something about) it," Bailey told reporters following a speech in London.
"We have talked to them already and will be talking to them again."
Bailey had earlier told a retail banking conference: "Good risk management means planning for unlikely but severe scenarios, and this means that we must not ignore the prospect of the disorderly departure of some countries from the eurozone.
"I offer no view on whether it will happen, but it must be within the realm of contingency planning," he added.
Questioned on Friday about the matter, the British Bankers' Association released a statement to AFP.
"UK banks remain well capitalised and are required by the FSA to undertake rigorous 'what -if' stress-testing to ensure they hold sufficient financial and liquid resources against severe scenarios of a varying nature," it said.
British Prime Minister David Cameron said earlier this month that his government was preparing for every scenario, as contagion from the debt crisis reached Italy.
"Here in Britain, outside the euro, we must prepare for every eventuality -- and that is exactly what we will do," Cameron told a London conference.
Also speaking earlier in November, Chancellor of the Exchequer George Osborne said "Britain and the British government prepares for all contingencies."
Britain is one of the 10 European Union countries that does not have the euro currency but it fears turbulence in the eurozone will heavily affect the kingdom. A total 40 percent of British trade is with eurozone countries.
Analysts on Friday played down the risk of a complete eurozone breakup.
"Greece is the only country that might leave the eurozone in the immediate future," said Michael Ben-Gad, head of economics at City University London.
"The long-term prospect is for the eurozone to remain intact but for the euro to devalue and inflation to rise on the continent," he told AFP.
Michael Hewson, an analyst at trading group CMC Markets said that since the euro was designed "with no provision for an exit strategy of any country ... any (breakup) solution will be like trying to unscramble an omelette.
And on Britain's preparations, he said: "At this point it is not immediately clear what these contingency plans are."
- Dow Jones Newswires contributed to this report -
Copyright © 2013 AFP. All rights reserved. More »