Eurozone-led recession could spark new crisis


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The Independent Online

The risk of another global recession sparked by a collapse in the euro could lead to a renewed banking crisis, a financial think-tank has warned. There will also be further job losses in the sector as banks struggle to retain profitability, it predicted.

The annual Banking Banana Skins survey published today by the Centre for the Study of Financial Innovation and PricewaterhouseCoopers puts macroeconomic risk at the top of a list of 30 possible risks to banks.

The list was put together by asking more than 700 people involved in the banking industry in 58 countries about the dangers facing the sector.

The main cause of anxiety is the eurozone crisis, with the risk of sovereign default in many countries.

A euro collapse would send shockwaves far beyond Europe, prompting bankers in countries such as the US, Canada, China, Argentina and Australasia to put the crisis at the top of their list of concerns. The consequences of a crash would be large credit losses, which bankers put at second on the list. That would be followed by a funding crisis. Bankers put access to liquidity and fresh capital next on the list.

Those surveyed also expressed worries about the increase in political interference, such as David Cameron's involvement in British bank bonus payments. However, fears about meddling politicians have lessened, falling from number one on the list this time last year to number five.

Regulation, too, remains a concern for bankers, presumably longing for the good old days of "light touch" supervision, one of the factors commonly blamed for the onset of the global banking crisis.