UK banks ‘at risk from eurozone’

The Bank of England has highlighted concerns both in the eurozone and Asia

The continuing financial problems in the eurozone pose a threat to UK banks, the Bank of England has warned.

In its latest half-yearly Financial Stability Report, it calls for stringent new tests on the strength of European lenders.

It also wants a comprehensive solution to the financial situation affecting the eurozone.

The Bank further said “overheating” in emerging markets, such as China and India, could eventually hit UK lenders.

The Bank’s comments came after European Union leaders agreed to set up a permanent mechanism to bail out any member state whose large public deficits threaten the 16-nation eurozone.

Creating such a eurozone stability mechanism will require a change to the EU’s Lisbon Treaty – but the wording has now been agreed, diplomats say.

UK Bank of England is concerned about the continuing debt situation in the eurozone – the 16 nations that share the euro – because British banks have substantial investments in many of those countries and specifically their banks.

Regarding overheating in emerging markets, it points to stock markets in countries like India and Indonesia being at historically very high levels, and spiralling property prices in China.

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