UK banks face Argentine losses

BRITISH banks face hundreds of millions of pounds in write-offs as Argentina took a decisive step on Wednesday towards devaluing its currency.

The central bank dropped an emergency measure requiring banks to accept pesos at parity with US dollars. The country has already defaulted on debts, but its economic-political crisis has deepened.

Formal devaluation will require a law change. Most Argentines are paid in pesos, but have debts, including mortgages, in dollars. On the black market, pesos now trade at just 70 cents.

British bank HSBC has lent £3.5bn, Lloyds TSB £1.4bn. Barclays' exposure is £500m. Easing bad debt worries for the banks were figures showing UK company bankruptcies fell 1% last year.

Some Argentine government bonds yield - in theory - 50%. Mike Noone, senior Latin American economist at WestLB, said risk of the contagion to other emerging markets is 'fairly moderate'. Emerging market bonds worldwide yield nearly 13%, down slightly in a year.