November 24, 2011
U.K. Banks Plan for Euro-Zone Split
London, U.K. banks are drawing up contingency plans for the possible breakup of the euro zone, a senior U.K. regulator said Thursday, the latest in a series of signs that financial markets are thinking about the once unthinkable.
Andrew Bailey, deputy head of the Financial Services Authority's prudential business unit and an executive director of the Bank of England, said U.K. banks can't ignore the possibility of a disorderly departure of some countries from the euro zone and should prepare for the worst.
"We are talking to them about it and they are doing it," Mr. Bailey told reporters following a speech in London. "We have talked to them already and will be talking to them again."
Mr. Bailey joins a growing chorus of economists, bankers and regulators urging the financial industry to include a break-up of the currency bloc in their risk planning.
"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 euro zone," Mr. Bailey told a retail banking conference organized by business-events company Marketforce and the Institute of Economic Affairs, a think tank.
"I offer no view on whether it will happen, but it must be within the realm of contingency planning."
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