By Simon Miller
UK banks had a £15bn exposure to the sovereign debt of Greece, Portugal, Italy and Spain in Q3 2011 according to a report from TheCityUK.
In addition, the lobby group said that the UK's banking sector also had over £190bn in exposure to the private sector of these troubled eurozone countries.
In comparison, French and German banks had an overall exposure of over £400bn and £300bn respectively to these private sectors and more than four times the UK's direct holdings of vulnerable sovereign debt.
As a whole, UK banking sector assets were up 3% in 2011 to a record £8,119bn according to TheCityUK report Banking 2012.
The report said that although profitability has declined about 10% during the year, "UK banks have made significant progress in improving capital and funding and are in a better position than other large European countries on a variety of measures".
TheCityUK found that UK banks had reduced reliance on wholesale markets to fund lending, with loan-to-deposit ratios declining 4% on average in 2011 to 102%.
Deposits have grew faster than loans since 2009, narrowing the funding gap to 8% of lending in 2011 from 24% at the outset of the credit crisis. UK banks had also reduced leverage ratios, to just over 20 times in 2011 from over 40 times three years earlier. Credit availability and lending however remains constrained, in common with other developed countries.
The UK has the second largest banking sector assets in the world after the US. Foreign banks held 48% of total assets, a higher proportion than in most other large countries. The UK is the leading centre for international banking, and its 18% share of cross-border bank lending in September 2011 was the largest in the world. The 251 foreign banks physically located in the UK in 2011 was more than in any other centre.
The report also showed a slight fall in global investment banking fee revenue to $70.3bn (£43.2bn) in 2011, as deal activity and trading volumes slowed in the latter part of the year. The $15.7bn fee revenue generated in Q1-2012 was down a fifth on the same period in 2011