BOE Asks Banks to Boost Liquid Assets Ahead of Brexit, FT Says

(Bloomberg) -- The Bank of England is asking some U.K. banks to hold three times more liquid assets in the event of a market meltdown with a no-deal Brexit later this month, the Financial Times reported, citing people familiar with the situation.

Some lenders must hold sufficient so-called easy-to-sell assets to withstand 100 days of “severe stress” instead of the usual 30 days, the newspaper said. That’s when banks suspend interbank lending.

The U.K. has made “constructive developments” in preparing for a no-deal Brexit, though the economic impact of crashing out of the European Union would still be substantial, Bank of England Governor Mark Carney said last week. Authorities have taken steps to protect derivative markets, reduce financial risk and minimize trade friction, while rolling over some third-country trade agreements that Britain has through the EU, Carney told a House of Lords committee.

U.K. Cabinet members sought to persuade pro-Brexit Conservatives to back Prime Minister Theresa May’s exit deal on Tuesday, warning that leaving the European Union might not happen at all as it appeared unlikely she will win enough concessions to win them over.

The BOE is monitoring the liquidity levels at banks daily ahead of the March 29 exit day. Lenders were also asked to model their balance sheets for the scenario where they won’t be able to swap the British pound for U.S. dollars for several days, the FT said.

The BOE declined to comment on the report, the newspaper said.

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