Reply #58: Europe simulates financial meltdown

[54anickel]

http://news.yahoo.com/s/ft/20060409/bs_ft/fto040920061619283914;_ylt=AghWjUoRb7UpD8jzv1Wulz72ULEF;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA--

Europe's financial regulators have held a "war game" exercise, simulating a continent-wide financial crisis, amid fears they are ill- prepared to stop a problem in one country spreading across borders.

The exercise involved simulating the collapse of a big bank with operations in several large countries to see whether the European Central Bank, national central banks and finance ministries could work toget- her to contain the crisis.

It is understood the exercise took place at the headquarters of the ECB in Frankfurt at the end of last week. One person involved said: "It is like checking whether a nuclear power plant can survive a plane crashing into it."

The exercise took place on the eve of a meeting of European Union finance ministers and central bank chiefs in Vienna, at which the bloc's financial stability was high on the agenda. Officials at the meeting confirmed that ministers had discussed the ECB crisis management exercise.

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Europe's vulnerability to a cross-border financial crisis was revealed in a confidential report prepared by officials for the Ecofin council. Regulators are particularly worried about the risks to financial stability posed by the growth in hedge funds and credit derivatives.

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But, but, but Greenspin always said hedge funds and credit derivatives are good for you, they add needed liquidity to the markets.