By Marcus Brooks

The Bank of England will issue orders to the UK’s banking sector urging them to raise more capital as a matter of urgency to absorb potential systemic banking failure from the eurozone.

The Bank of England’s Financial Policy Committee (FPC) will make the ruling later on today.

This directive is a big game changer since it was created by the British Chancellor George Osborne to maintain the integrity of the banking system.

The BBC’s business editor, Robert Peston, says the order will come as rather a disappointment to the banks.

More than four years on from the financial crisis, the banks have been taking steps to strengthen themselves.

Yet despite this, bbc correspondent says, the UK’s banks still do not have enough capital to absorb potential future losses on loans.

He also states that view taken by the Bank of England is that the banks will not provide the credit lifeline needed to stimulate the economic recovery unless and until they raise additional capital.

So my assumption based on this report is that there is a real possibility of a banking collapse in the UK given the fact that the British banks have more than £200billion tied up in some of the Eurozone’s weakest economies, according to the Daily Mail. The high pass rate in the stress tests in 2011 have created fears that they were not robust enough and looking at the currents crisis in Cyprus I still believe that the European banking system is still in grave danger. Take for example the fact that Barclays has to the tune of lent £94billion to governments, businesses and households in Portugal, Ireland, Italy, Greece and Spain. HSBC has £23.5billion of exposure while Lloyds claimed it has only £86million of loans to Spain and Italy.

A previous round of stress tests last year passed all but seven of Europe’s banks. Ireland’s banking system was given a clean bill of health – but collapsed just months later.


I never thought in my life time that Governments would go after private bank accounts in the European Union, but now that this precedent has been set it should be apparent to everyone that no bank account will ever be considered 100% safe ever again.  Without trust, a banking system simply ceases to function, and right now there are prominent voices such as UKIPS Nigel Farage  that are loudly warning that trust in the European banking system has been shattered and that people need to get their money out of those banks as quickly as they can. I would urge all my British readers to consider moving their wealth into precious metals or into a building society (A building society is a mutual organisation. This means that instead of having shareholders, it has members who collectively own the business and are also its customers therefore have far less exposure than your regular high street bank.

Had the people of Cyprus not been so gullible in accepting fake ass bank guarantees, and had opted to diversify their savings into precious metals the Cyprus story may have been different.

Categories: Business

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