EU referendum: Bank of England offers banks £250bn in emergency funds

 
Jake Cordell
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Mark Carney said Brexit was the biggest risk to UK financial stability
Mark Carney said Brexit was the biggest risk to UK financial stability (Source: Getty)

The Bank of England has made £250bn available to UK banks to try to mitigate the market turmoil in the fallout from the UK's vote to Leave the European Union.

Mark Carney said this morning the significant "backstop" would be put in place to "support a functioning market", adding that the Bank would not "hesitate to take additional measures as required as markets adjust and the UK economy moves forward."

The governor said he "expects" banks to draw on the emergency sterling and foreign currency cash so that market liquidity does not dry up. He reportedly had a conference call with the UK's main lenders before the markets opened this morning to outline the Bank's immediate policy response to the historic decision.

Brexit Britain: What you need to know

UK lenders had shunned Threadneedle Street's offer of emergency money before the vote, with the markets increasingly pricing in a Remain outcome during the final few days of the campaign.

Sterling suffered its biggest one-day fall since it became a free floating currency overnight, dropping to $1.37 by early morning after passing $1.50 before referendum results started to be announced in the early hours of this morning.

The Bank of England stressed that measures put in place since the financial crisis meant UK lenders were well capitalised and the financial system remained "resilient".

Carney stood firm on what the future course of monetary policy would be, indicating only that the rate-setting monetary policy committee (MPC) would decide on how to respond to the Brexit vote as the full implications become clear.

The MPC previously said it would face a difficult trade-off to balance rising inflation in the aftermath of a vote to leave and the pressures placed on financial stability.

The next MPC meeting is not scheduled to take place until 14 July, though Carney has previously indicated he can gather the committee to change policy whenever he sees fit.

The next big publication from the Bank will be the report of the Financial Policy Committee on 5 July, which will be one of the first chances to assess the Bank's formal thinking on how the fallout from the vote has affected the UK economy.

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