British banks advised to build up cash reserves due to eurozone crisis

25 June 2010

The Bank of England (BoE) has advised banks in the UK to build up their cash reserves to secure themselves against the effects of the ongoing sovereign debt crisis afflicting the eurozone.

While welcoming the measures taken to tackle the economic problems on the continent, the BoE report warned the British financial institutions' exposure to other European lenders makes them potentially vulnerable if defaults occur, reports BBC News.

Even when these risks are not taken into account, the paper warned that the British banking sector will need more cash at its disposal in the near future, as loans mature and government funding is paid back.

"In the UK, the largest banks will need to refinance or replace around £750 billion - £800 billion ($1,191 billion) ... by the end of 2012," it said.

Earlier this week, it was announced that the UK, Germany and France will all be introducing a levy on bank balance sheets intended to encourage firms to have less risky funding profiles.

By Tony Aynsley

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development