'Banks will survive the storm in Greece' according to British Bankers' Association

By Simon Watkins And Dan Atkinson

Britain's banks can survive the fallout from the Greek crisis, the industry's trade group has said.

As Greek politicians prepare for another gruelling week of talks aimed at securing drastic cuts in public spending and a fresh bailout by eurozone partners, Angela Knight, chief executive of the British Bankers' Association, said Britons should not fear for the stability of their banks, even in the event that Greece defaults on its debts.

'We can be confident our banks can weather this,' she said. 'Their exposure to Greece both directly and indirectly is still modest in comparison with some of the Continental banks.'

Angela Knight, chief executive of the British Bankers¿ Association

Survival: Angela Knight says Britons should not fear for the stability of their banks

Knight's comments came as Sir Mervyn King, Governor of the Bank of England, warned the biggest threat to Britain's banks came from the Eurozone crisis and as banking shares across Europe fell sharply on fears Greece will default on its debts.

British banks were among the worst hit. Royal Bank of Scotland fell more than 11 per cent – the worst performance by any European bank. Lloyds was down ten per cent while Barclays dropped almost eight per cent.

Speaking ahead of its annual international banking conference in the City this week, Knight said UK banks had taken major strides towards stability in the past year.

'We took decisions early and we did things properly,' she said. UK banks have a total exposure to Greek debts of £9.2 billion – £2.5 billion is owed by Athens, about £1.4 billion by Greek banks and the rest by other businesses.

This is modest in comparison with the £35.4 billion that French banks have lent to Greece and £20 billion owed to German banks. But as other European banks face losses, that may hit their own bonds, which could affect UK banks.

Elsewhere, there are signs that the crisis is prompting some in troubled eurozone countries to switch into gold.

French finance minister Christine Lagarde is favourite to win the race this week to be new head of the International Monetary Fund against her rival, Mexican banker Agustin Carstens.