October 11, 2016 / 10:36 AM / 10 months ago

BoE's Kashyap says worried about spillover from EU banking woes

LONDON, Oct 11 (Reuters) - A Bank of England policymaker charged with overseeing the banking sector said he was worried about the risk of British banks being hurt by trouble among their peers elsewhere in the European Union.

"I am particularly worried about contagion from stress coming from the European banks and whether there might be linkages (perhaps indirect) between them and the largest UK banks," Anil Kashyap, a member of the BoE's Financial Policy Committee, said.

"The weak condition of some of the large European banks worries me most. As indicated above, we do not really fully understand all the potential channels of contagion that could arise if a major bank on the continent required recapitalisation," he wrote.

Speaking to lawmakers, Kashyap said the recent problems at Deutsche Bank were linked to concerns about its future profitability, not its current capital.

He said the recent sharp fall in sterling had not yet created risks to Britain's financial stability. He also said he did not see the country's large current account deficit as a big risk. (Writing by William Schomberg, editing by Andy Bruce)

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