Sun, 06 Jun 2010 07:21:10 GMT
Britain's Financial Services Authority (FSA) has asked the country's largest banks to model a number of disaster scenarios in response to Europe's deepening financial crisis.
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According to analysts, banks in Britain have a total exposure of more than £100 billion to Greece, Portugal and Spain alone. In one scenario, British banks have been asked to model the possibility of Greece defaulting on its loans.
The request is part of a "risk map" by senior officials at FSA to examine potential quandary that British banks may encounter as a result of the eurozone country's growing economic troubles.
Even after an EU rescue package worth €750 billion (£620 billion) was set up to help bailout EU countries on the verge of bankruptcy, European markets continue to remain on edge.
New concerns have risen over Hungary's finances as their new government recently announced that its predecessors falsified data on the country's finances. Moreover, the euro has slid below $1.20 for the first time since March 2006, with analysts expecting it to hit the same level as the dollar.
British Chancellor George Osborne is expected to announce a new tax on British banks as well as cuts to welfare programs and public sector pay in his emergency budget on June 22, which has been backed by the G20 groups of leading nations.
Prime Minister David Cameron has signaled that Britain faces "years of pain ahead," as the government tries to cope with its own financial crisis.