Get ready for tougher times, Bank of England tells banks

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LONDON, July 20 (Reuters) – Investment banks need to prepare for tougher times ahead by properly checking the stability of their clients as a prolonged period of cheap money comes to an end, Bank of England executive director Nathanael Benjamin said on Wednesday.

“It is highly probable there are individual businesses or marginal players that have relied upon the easy conditions of the past decade who might struggle to adapt when the new tide comes in,” Benjamin told an event held by UK Finance, a banking industry body.

“Banks’ executive management and boards should challenge themselves and think ahead about what their firm’s place is in this new world.”

Benjamin, responsible for supervision of international banks in London, said the collapse of Archegos and, earlier this year, suspension of nickel trading in London after the metal spiked to record highs showed that counterparty risk concentrations were not being appropriately identified or controlled at banks.

“Risk concentration should not only be assessed on a client by client basis, but across all clients combined,” Benjamin said.

“Whilst this information may not be readily available, the onus is on firms to demand of their clients the information they need to assess the risks they are exposed to.”

(Reporting by Huw Jones, Editing by Louise Heavens and Nick Macfie)

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