C&B Notes

U.K. Preps for the Potential End of the Euro

While Eurozone technocrats — with the help of central banks from across the world — continue to grasp for ways to save the Euro, British banks and regulators are preparing for a different outcome.

The U.K.’s Financial Services Authority has been talking with chief risk officers at top British and international banks to get a better understanding of their contingency planning, the people said.  The regulator has asked banks to submit reports detailing their preparations for what would happen if the monetary union unraveled or individual member countries were to revert back to their old national currencies.

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The FSA has recently stepped up its efforts to gauge the fallout.  Late last month, the agency sent an initial letter to banks asking for their update on contingency planning such as how the banks would handle legal agreements based on the euro currency and how they would internally process a breakup, according to a people familiar with the letters.

The FSA found that banks had mostly been considering scenarios in which just one or two countries — namely, Greece or Portugal — left the euro zone.  Regulators earlier this week sent another letter pressing banks to consider plans for a breakup of the entire 17-nation currency bloc, these people said.  Members of the FSA this week have also been meeting with U.K. banks’ chief risk officers.  U.S. banks have been having similar discussions with their regulators, these people said.

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In all, some executives have privately concluded that a full, disorderly breakup of the euro zone would be “pretty catastrophic” for them, this person said.

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