(December 7 – 12:40 ET) – The U.K.’s Financial Services Authority is cautioning banks to be wary of their telecom loan exposure.

The FSA says bank chief executives, “are being reminded that the size and nature of the risks involved make it more than usually important that their banks follow sound practice to manage their exposures to the telecommunications industry”.

It reviewed the exposure held by 34 banks and found that most firms are managing the current risks “prudently and have implemented appropriate risk management policies”. Major UK commercial lenders have an avergae exposure of 40% of group capital and 5% of group assets.

“Given the importance of the telecoms industry and its massive investment programme, sizeable bank exposures to it are not surprising,” said Michael Foot, managing director of the FSA, “However, firms need to have high-calibre risk management systems in place and need to be acutely aware of the risk of building up concentrations of exposure to the industry, which they might not be able to trade down as quickly as they once hoped. In an industry where financing demands are high and exposures can be rattled up very rapidly, firms should remain particularly alert to any deterioration of conditions.”
-IE Staff