6.7 C
Tuesday, March 5, 2024

Irish debt crisis failings denied

Must read

FSA boss Lord Turner has denied 'failings' over the Irish debt crisis

City regulators have not taken their eye off the ball in reining in UK bank exposure to Ireland’s debt crisis, the head of the Financial Services Authority has said.

Lord Turner, chairman of the FSA, told MPs the financial exposure of the UK banking sector was “not out of line with what you’d expect” despite market fears that have hammered bank shares in recent days.

The FSA boss, appearing before a Treasury Select Committee hearing, was criticised for “regulatory failings” in letting banks have so much cash linked to Ireland.

The UK economy’s vulnerability to Ireland has prompted the Government to agree an estimated £7 billion in bailout cash to help save it from going bust.

Banks suffered further share volatility on Tuesday as fears failed to subside over the impact on the sector of Ireland’s woes, with reports suggesting the most heavily exposed – Royal Bank of Scotland and Lloyds Banking Group – have £54 billion and £27 billion at stake respectively.

But Lord Turner told MPs the FSA had not made failings over Ireland, confirming its bank stress tests took into account exposure to the country.

He explained that part-nationalised banks RBS and Lloyds had built up their exposure to Ireland not through a “sudden splurge” of loans to Irish banks or through buying sovereign bonds, but due to their presence in the country.

RBS owns Ulster Bank, which is based throughout Northern Ireland and the Republic, while Lloyds-owned HBOS has also had a significant business in Ireland for some years.

Lord Turner said the fundamental bank exposure was to the Irish economy, not the Irish state or banks, and added that banks had not been left overly exposed.

However, his comments are at odds with those of Bank of England Governor Mervyn King, who admitted last week the issue was “by no means trivial” to UK banks.

- Advertisement -

More articles

- Advertisement -

Latest article