Bank of England warns UK banks about euro crisis
The Bank of England has today highlighted the problems in the euro zone and suggested that UK banks should build their capital reserves for the future. This is not the first time the Bank of England has highlighted the euro zone as a potential problem for the UK banking arena but it would now appear that concerns are more deep-seated. So how would problems in the euro zone impact the UK financial sector?
Aside from the fact that the UK economy has strong trade links with Europe, many UK banking institutions have significant exposure to countries operating in and countries within the euro zone. As a consequence, if we were to see further financial unrest within the euro zone this would lead to reduced trade with UK businesses and significant write-offs for many UK banking giants. This would then have a knock on effect with regard to credit in the UK and very quickly we could find ourselves in a downward spiral of economic problems.
Whether or not the UK actually adopts the euro is not necessarily important especially when you bear in mind the fact that many UK businesses have strong trading links with the euro zone.
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