Bank of England plays down risk to lenders after Carillion collapse

The Bank of England has said UK lenders are not under direct threat following the collapse of Carillion this week, but cautioned that the ripple effects are yet to be fully felt.

Treasury Select Committee chair and Conservative MP Nicky Morgan questioned a panel of Bank representatives about the impact on financial services, following reports that some lenders could face hefty losses due to billions of pounds worth of exposure on its loans and debt.

The Bank's deputy governor for prudential regulation and head of the Prudential Regulation Authority, Sam Woods, assured that he had checked the exposure data for banks and insurers but found little reason to be concerned.

"Those direct exposures are entirely manageable across all the institutions," he told MPs on Tuesday.

However, the secondary effects are not as easily measured.

"There's then the question of will there be a wider, indirect issue with suppliers and that's more difficult for us to get a handle on," Mr Woods said, but added: "I'm not massively worried about it."

It comes amid reports that Carillion's lenders, including Barclays, HSBC, Royal Bank of Scotland (RBS), Lloyds and Santander UK, are facing heavy losses on their £2 billion exposure to the collapsed outsourcer.

There are also issues surrounding the hole left by Carillion on the services front, with the collapsed company having been contracted to manage a number of company buildings and facilities, including their security.

"We've been asking institutions, 'quite aside from your financial exposures, are you going to be able to open your doors on Monday?', which is sort of the financial services version of the problem that the Government's been having to deal with," he said.

"So far it's been OK, there have been a few issues but nothing too serious."

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