The Bank of England has a contingency plan in place in case Greece defaults on its debt payments, its governor Sir Mervyn King has said, BBC reports.

Speaking before the Treasury Committee, he would not say how likely he thought a default would be, but added that the markets put the risk at 80%.

Sir Mervyn said the concern was how UK banks could be affected by knock-on effects of any Greek default.

However, he did not reveal any details of the Bank's contingency plan.

Sir Mervyn said the uncertainty regarding French and German banks was the extent to which any losses they encounter in Greece might spread to the UK banking sector.

This is as a result of UK banks having lent money to their counterparts in France and Germany.

Sir Mervyn said there needed to be more transparency over the issue.

While he welcomed Greece receiving bail-out funds from fellow eurozone nations and the International Monetary Fund, he said this was not a solution to the country's problems.

Instead, he said Greece simply had to start exporting more, and importing less to turnaround its economy.

"Buying time appears attractive… but if the underlying problems have not changed, the problems come back in an even more extreme way," Sir Mervyn said.