British banks need to be prepared for a disorderly break-up of the eurozone, says Andrew Bailey, the FSA's director of banks and building societies.He said that while the debt crisis in the 17-nation currency zone had not singled out the UK banks, "We must not ignore the prospect of the disorderly departure of some countries from the eurozone." Mr Bailey, who will be deputy head of the new Prudential Regulation Authority, told the Future of Retail Banking Conference in London that the regulator was keen to see banks plan for severe disruptions if the eurozone debt crisis intensifies. Looking ahead, he said weight of new banking regulations will prompt a re-think of the role of investment banking in banks. "My best guess is that we will see a sharp reduction in the scale of investment-banking activity undertaken in the banking sector," he said . He stressed the need for banks to build up longer-term funding to be used as a buffer "in times like the present". However, he cautioned against rushing through reforms: "Many banks still have excessive leverage, and there is a need for a clear path to reduce leverage, but to a timetable that does not damage the wider economy." He welcomed moves by banks to sell non-core assets as it sent an important signal to investors, regulators and the public that lenders were committed to structural changes. (sirce ; UK press)
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Thursday, November 24, 2011
British banks need to be prepared for a disorderly break-up of the eurozone, says Andrew Bailey, the FSA's director of banks and building societies.He said that while the debt crisis in the 17-nation currency zone had not singled out the UK banks, "We must not ignore the prospect of the disorderly departure of some countries from the eurozone." Mr Bailey, who will be deputy head of the new Prudential Regulation Authority, told the Future of Retail Banking Conference in London that the regulator was keen to see banks plan for severe disruptions if the eurozone debt crisis intensifies. Looking ahead, he said weight of new banking regulations will prompt a re-think of the role of investment banking in banks. "My best guess is that we will see a sharp reduction in the scale of investment-banking activity undertaken in the banking sector," he said . He stressed the need for banks to build up longer-term funding to be used as a buffer "in times like the present". However, he cautioned against rushing through reforms: "Many banks still have excessive leverage, and there is a need for a clear path to reduce leverage, but to a timetable that does not damage the wider economy." He welcomed moves by banks to sell non-core assets as it sent an important signal to investors, regulators and the public that lenders were committed to structural changes. (sirce ; UK press)
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As the fall in the euro shows, the City is not impressed that Germany and France have not agreed any new immediate action, but will insteald develop EU Treaty changes (a notoriously laboured process).
David Scammell, a fund manager at Schroders, believes that EU leaders (eg Angela Merkel) will still be forced to cave in. He told the BBC that:
The markets will be disappointed by this news.
Treaty changes take time, so something with real firepower has to be done now to break the cycle -- and that means the ECB.
1.47pm: Merkel clearly hasn't given any ground -- she just reiterated her view that eurobonds (stability bonds) are neither necessary nor appropriate.
Monti, though, adds that the key issue is a fiscal union to generate more stability...with eurobonds possibly playing a role within that. Disagreement between the leaders?....
1.42pm: Merkel and Sarkozy are dominating the press conference -- Monti, the new man at the party, is standing there with a wry smile. Have 'Merzoky' forgotten he is there?
1.39pm: More details on the proposed EU treaty changes -- the plan is that France and Germany will draw up a draft proposals before EU leaders meet on 9 December.
Merkel also makes it clear that she is calling the shots. She repeatedly says that:
The ERCB is independent and is responsible for monetary policy alone.
These treaty changes we're planning, Merkel says, are about fiscal union and nothing to do with the ECB.
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