The Governor of the Bank of England yesterday dismissed fears the Argentine crisis would spread to the rest of the world or harm the British economy.
Sir Edward George said the mounting woes in Argentina were "not welcome" in the current economic climate but said it was not "too worrying". "It has been a tragedy that has been a long time in coming but as far as its implications for the rest of the world, it's already been substantially discounted," he said.
He told BBC Radio he was not worried about the implications for the UK's financial system from British banks' links with the stricken economy.
"The British banking system is not in bad shape to confront these problems," he said. "Given the other adverse international developments the British banking system is in pretty good shape."
His comments came as the Argentine government said the economy contracted at an annual rate of 4.9 per cent in the third quarter of 2001.
Meanwhile, the country's stock exchange said it would not open for trade yesterday in a statement issued minutes before the scheduled opening.
While the detailed implications of Argentina's turmoil for the UK banking sector remain hard to gauge, the stock market took the view there was no reason to panic. Only HSBC among the major banks saw its shares dip on worries over its exposure.
According to its most recent accounts, HSBC had some $5bn (£3.5bn) of Argentinian assets, out of a total asset base of $692bn. It has 225 branches in the country, employing 6,000 people, making it Argentina's seventh-largest bank.
"We do not comment on this sort of thing," a spokesman said. "We are monitoring the situation, and we are in the region for the long term."
The group, whose shares slid 2.5p to 802.5p, earned less than 3 per cent of its profits from Latin America last year. It voiced concern over the situation in Argentina in August.
A spokesman for Lloyds TSB, which has more than £2bn of assets in the country, said it did not have a large presence in Argentina. The bank has 40 branches, under the Lloyds name. Standard Chartered, the emerging markets bank, said fewer than 1 per cent of its assets were Argentinian, while Barclays disclosed a 0.2 per cent exposure. Abbey National, whose corporate loan book took a £100m blow from Enron last month, declined to comment, although it is not thought to have any exposure. Royal Bank of Scotland also declined to comment.
In his interview, Sir Edward said rather than Argentina the greater threat to the UK economy was the global slowdown that had so far seen the United States, Germany and Japan fall into recession.
The Bank has tried to offset the impact of the slowdown by bolstering domestic demand through lower interest rates, Sir Edward said, while higher government spending had also played its part. The Bank's Monetary Policy Committee has cut interest rates seven times this year to a 37-year low of 4.0 per cent.
On Thursday revised figures showed the UK economy grew even faster than previously thought in the third quarter at 2.2 rather than 2.1 per cent.
And Sir Edward was optimistic about a pick-up in the world economy towards the end of 2002. "Having been through a progressive slowdown, I would be very surprised if by this time next year we were not in a clear recovery phase in terms of the global economy," he said.Reuse content