BRITAIN’s biggest banks were told to perform internal stress tests to judge the impact of member states crashing out of the euro, the Financial Services Authority (FSA) chief Adair Turner said yesterday.
The chance of countries leaving the single currency is only slight, Turner said, yet argued that banks should still be prompted into preparing for such eventualities.
“We’ve certainly encouraged them to run those scenarios for Greece, Spain, Italy, Portugal and Ireland,” Turner told parliament’s Treasury select committee in Westminster yesterday.
“I think we consider the chances very low, very very low for at least some of those countries on that list, but I think it is sensible to encourage people to run extreme risk scenarios.”
Turner was speaking to MPs in relation to his senior position on the embryonic Financial Policy Committee (FPC) – the Bank of England’s super-regulatory wing.
“If we were thinking about the possibility of countries actually exiting the Eurozone, then you have problems arising not from assets going bad and not being repaid, but the assets are paid, redenominated into a new currency, but so too may be the liabilities,” Turner explained.