Troubled eurozone could hit British banks, IMF warns

British banks are as exposed to troubled eurozone nations as their French and German peers, according to the annual International Monetary Fund (IMF) report on Britain.

British banks’ exposure to Greek, Irish, Spanish and Portuguese exposure accounts for 14% of national GDP, the same figure as for French and German banks.

Britain’s exposure is more concentrated in Ireland, says the IMF, while France and Germany’s is more focused on Greece.

“Negative shocks in any of these markets could necessitate further write-downs and weaken UK banks’ capacity to support the domestic economic recovery with adequate credit supply,” the report warns. (article continues below)

“Additional spillovers could arise from the important role that foreign banks play in the UK, mostly via London’s wholesale financial services industry, but also in retail finance.”

Britain’s banks have consolidated foreign assets of more than 180% of GDP, the IMF reports, although this number has come down over the last two years.

One exposure of particular concern is to America and its troubled commercial real estate sector, as well as other economies in Asia and western Europe.