Much to my surprise I found out recently that a large number of UK Banks have already been working on their plans for the eventual breakup of the Euro. As I understand it the banks are basing their plans around first one Euro State going, quickly followed
by others, with various scenarios being played out. For example, a split, with the northern European States retaining the Euro and the Southern States going whatever way they see fit. A complete demise of the Euro has also featured as a likely end game but
is not being considered as a first step.
‘Death of the Euro’ projects have been instigated; include coping with investor and customer panic, and building a first response capability to try and maintain confidence. System changes replacing the Euro with a default currency have been discussed,
but I understand that no consensus has yet been achieved. However, with the potential of a fast collapse and contagion, plans include a quick switchover.
Some banks have been already quietly been downsizing their Euro exposure or are at the very least managing it closely. It is obviously a very sensitive issue of which all the banks involved are fully aware.
Although unlikely to be confirmed publically, it is my understanding that these projects have been commenced with the full awareness of the FSA, The Bank of England and the Government. All parties concerned having accepted the necessity, as a major contingency,
for the protection of investors, as well as financial institutions and a responsible process for the Banks to have undertaken.
It is not known if similar ‘death of the Euro’ projects are underway across Europe but one would hope so. With countries likely to move out of the Euro under a continuing watching brief, UK Banks are not willing to risk their business to political
rhetoric and some as yet unforeseen agreement. For the first time, the horrors of the demise of the Euro feature within the advanced plans of UK Banks. Other financial organisations should take heed and be planning also!