Europe's banks ‘face contagion risk'

As Ireland prepares to accept a rumoured €80bn euro European Union and IMF bailout to pull it from the mire of its financial crisis, fund managers consider what the contagion effect may be on the banking sector in the UK and Europe.

F&C’s director of UK strategy Ted Scott has warned contagion from Ireland could bring Europe’s entire banking system to its knees. He urged policymakers to remember the Lehman bankruptcy, which almost caused the collapse of developed market banks. “If the Irish banks and their creditors are not protected it would lead quickly to runs on other Irish banks and banks in the rest of the periphery economies. It is not too strong to say that it could lead to the collapse of the euro itself,” he said. “The overriding priority has to be to ensure the viability of the banking system that is cu...