The Bank of England has asked U.K. banks to put emergency plans in place to be able to absorb the potential shock from an escalation of the Greek debt crisis.
Minutes from the Financial Policy Committee’s latest meeting show the central bank believes the current turmoil in Greece is one of the biggest external risks to the U.K’s financial stability. Because of this, it is already working closely with the Treasury and bank regulator the Financial Conduct Authority to make sure contingency plans are ready.
“The realization of any of the global risks that the Committee had identified could trigger abrupt shifts in global risk appetite. This might, in turn, lead to a sudden reappraisal of underlying vulnerabilities in highly indebted economies, or sharp adjustments in financial markets,” the BOE policy makers said, according to the meeting record released Tuesday.
Since February, Greece has been working closely with its international lenders — the International Monetary Fund, the European Central Bank and the EU — to lay out a reform plan, which is necessary for unlocking its next tranche of bailout money. But attempts to hammer out a deal have so far failed: Greece is calling for greater leniency on its bailout terms, while its lenders insist Athens must stick to its earlier arrangements and implement already-agreed economic overhauls.
Adding to tensions between the two sides, Greek lawmakers on Tuesday voted to set up a committee to investigate the circumstances under which the bailout was initially agreed, according to media reports.
Economists say Greece is at risk of running out of money later in April, unless the next portion of bailout funds is released. Without the money, the biggest concern is that the country will default on its debt and ultimately leave the eurozone, a so-called Grexit.