Because London is one of the world’s two largest financial center hosts, the United Kingdom is the only country other than the United States hosting numerous, very large broker-dealers that are owned by foreign banks and also a broad array of commercial bank subsidiaries and branches that are owned by foreign banks.
All those who had trouble following this line of risk-free-debt argument saw their doubts confirmed by the sovereign debt crisis in Europe. It became obvious that we need to rethink the assumption that loans to governments are risk-free. In actual fact, sovereign risk is a cluster risk because the default of a sovereign as single debtor can well cause bank insolvency.