UK Banks Told To Model Capital Controls, Bank Runs, 20% Devaluation

Tyler Durden's picture

First it was images of Londoners waiting in lines to exchange pounds for euros, reminiscent of Russia or Greece. Now, it is all out flashbacks to the "summer of Grexit." From the FT:

To prepare for a possible Brexit, banks have stepped up wargames in recent days, modelling for extreme pressure on their cash reserves. With the encouragement of regulators, some lenders, including HSBC, have even run modelling for the imposition of capital controls, according to people briefed on the exercise.


Banks said regulators had demanded a stress test that modelled for a 20 per cent fall in sterling. Traders said the volume of derivatives being used as protection against steep declines in currency and equities had not been seen since the peak of the eurozone crisis in 2011.


The cost of hedging against big moves in the pound — as measured by the one-week sterling volatility — rose to 43.86 on Wednesday afternoon London time.

The good news: should Leave win, "Britain will not be Greece"

Despite the heightened sense of alert, bank treasurers said they were confident their balance sheets were robust, given that capital and liquidity buffers were many times higher than in the last financial crisis.

Notably, even Europe seems to be admitting that "Plan B" did exist all along:

There were also signs some European leaders would be accommodating to the UK if it chose to leave. While Jean-Claude Juncker, the European Commission president, vowed there would be no further renegotiation with Brussels after a Leave vote, the head of Germany’s primary employers’ group said it would be “very, very foolish” to erect trade barriers with a Britain outside the EU.

And finally...

Some senior financiers saw worrying echoes of the 2008 financial crisis. Lord Mervyn Davies, the former Standard Chartered chairman and Labour minister, said: “Everyone’s fearing a 2008 freeze of the wholesale markets. If that happens [the Bank of England] is going to have to step in as a buyer of all assets.”

So is this just more scaremongering, or a legitimate confirmation that all hell may break loose?  All we know is that self-fulfilling prophecies have a nasty habit of becoming precisely that. Ultimately, the answer is in the hands of the British people.

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knukles's picture

Why?  Why is Sterling gonna fall 10% or 20% or 50% just because nothing changes?
It's all gonna be status quo with whatever happens.


TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) knukles Jun 22, 2016 2:37 PM

Must instill fear in the plebs or they may start to ask questions

froze25's picture

I expect project fear to really kick in over the next few hours.

JohninMK's picture

They seem to be running into problems in the fear camp.

You would expect the BBC to be solid on the Government's side as their financing is up for debate, but the last two big BBC debates have ended up hammering Remain. Even Dimbleby, BBC royalty, stabbed Cameron a couple of nights ago.

Whilst last night when it was pointed that there were 10 times the number of people in the audience of 1000 in the EU bureaucracy pulling more than Cameron's £150k a year (plus their Euro pensions and God knows what benefits) it stunned them. Almost a light switch moment.

CheapBastard's picture

" We controlled some folks. "

espirit's picture

Just properly shuffle the deck and deal the fucking cards.

But, oh noes.

Oracle of Kypseli's picture

For aeons, religions and Insurance companies have been capitalizing on human fear. Now come the banks and TPTB

MFL8240's picture

Whatever the crime syndicate can do to scare the people to vote for more ass reaming by Junket and his band of unelected technocrats.

abyssinian's picture

What's worst than being slaves? Vote to be slaves forever!

Wake up England! You will be much stronger, better, happier without EU the sinking ship telling you what to do.

Tomorrow is you Independence Day!

Philo Beddoe's picture

If voting made any difference they wouldn't let us do it - Mark Twain. 

Kirk2NCC1701's picture

If they feel like Serfs, wait till they become Slaves  (after a Bremain).

BTW, Merkel wants your to stay, to deny London a competitive edge over Frankfurt.

DetectiveStern's picture

Thanks dude, it's been a long battle but hopefully tomorrow the war is won.

knukles's picture

Due to the Shocking increase in Fear Porn Suicide Fatalities in the past month, the Government is proud to announce the establishment of the Ministry of Soma


BREXIT is certainty given leverage on debt amongst EU participants, and projected deficit going forward. UK bean counters have figured out that they should have gotten out 8 years ago and they don't want to be holding a bigger bag of 'odorous excrement' [see Margin Call] if they have to remain in. This exit is a foregone conclusion and has been since March 10th 2008.

N0TaREALmerican's picture
N0TaREALmerican (not verified) Jun 22, 2016 2:40 PM


I'm sure it's just because somebody in accounting wanted to run some numbers and just see what would happen. 

Yen Cross's picture

  I'm laughing over that call. The fear mongers are in full retard mode >

    Euro: CURRENCY:EUR quotes & news - Google Finance

    British Pound: CURRENCY:GBP quotes & news - Google Finance


   * So basically the banks were told to refill their printer and toner cartridges, and shine the ctrl-P buttons on their cheap Microshit keyboards.

Seasmoke's picture

And yet the paper price of Gold still is Red ?????

War Machine's picture

non binding vote.

tptb will not let the UK leave.

and we'll get ww3 before the election....

quadraspleen's picture

Love the way everyone is behaving like this will actually happen.

Over-egg the pudding, much?

EDIT: and if it does, it was meant to. Like the best cover story for GFC2 - ever

YouThePeople's picture

Here comes the fix. I say the odds be 50-50.

bluskyes's picture

it sounds like britons are sick of being told what to do.

hmmm perhaps the briton's nutsacks are beginning to swell?

agstacks's picture

It's a brilliant startegy when you're facing impending doom from decades of corrupted central banking (and know people are growing more and more skeptial of the Offical Narrative).  Give the plebs a choice (that isn't even legally binding), warn them repeatedly that doom will happen if they do not vote to stay, (knowing people will not take warnings from all the people that caused this in the first palce), then Building 7 the markets and blame it on the plebs who "probably shouldn't have been able to vote to leave" in the first place.  Paraiment votes to saty despite the Leave vote and it is Greece all over again,  Then the EU makes some new illegal law taking away memeber countries right to vote to leave. 

N0TaREALmerican's picture
N0TaREALmerican (not verified) agstacks Jun 22, 2016 3:11 PM


I like your summary.   It's simple.   It assumes the masses are dumbasses.   It ends up enriching those already at the top...   

Yeah,   it could be...  

quadraspleen's picture

This is what I've been coming to think over the last week or so. Totally.

Not sure the markets need Building 7'ing. Just stop running algos all over them and stop buying up equities. Simples. They'll go into free-fall by EOD

HoserF16's picture

It's become apparent to me that the Banksters are running-up the credit cards before the inevitable. Plain and simple. Eventually, average citizens need to demand a stop to all this nonsense and hold their politicians accountable. Until then, the Banksters are gonna party like it's 1999 all over again.

N0TaREALmerican's picture
N0TaREALmerican (not verified) Jun 22, 2016 3:12 PM


Re:  hold their politicians accountable

You mean like everybody voting incumbent again? 

Bruins4's picture

Whatever the bastards want to happen, will happen. Leave, stay, whatever. There is going to be a lot of dust tossed up in the air.

It's like you see two buildings fallen over, and you say to yourself...hold my beer and watch a third building fall.

burocracy's picture

what they are not prepared about is a 15% RISE in GBP .... how about the continental rats (me, for example) leaving the sinking EU ship?

withnmeans's picture

They seem to be on the wrong side of the trade....

Short the Euro, Long the Pound....  If England goes, the Euro has lost her support, there are others waiting in the wings to jump ship!

First to jump rebuilds the fastest!

Of course I would not stay long on the Pound forever, for this will find it's demize soon enough, as most all Western paper!

Carry On......


Brekyrself's picture

Capital controls further strenghten the arguement over have some of your savings in a crypto blockchain.  There are other stable alternatives compared to version 1.0 bitcoin.

onmail1's picture

USA Europe & JAPAN will not devalue

political reasons

but with political reasons 

they will crash

(when USA selectively starts cancelling the US treasuries)