The Bank of England's Prudential Regulation Authority has ordered several British banks to boost their stock of liquid assets ahead of Brexit to enable them to cope with the market meltdown expected to happen if the U.K. fails to reach a withdrawal deal with the EU, the Financial Times reported, citing people familiar with the situation.
The banks have been told to increase their so-called easy-to-sell assets to allow them to endure a period of severe stress — when they stop lending among themselves — of 100 days from the usual 30, the sources told the newspaper.
The central bank also instructed lenders to model their balance sheets on the assumption that they will be unable to swap British pounds for U.S. dollars, according to the March 11 report.
Banks' liquidity levels are being checked daily by the BoE's Prudential Regulation Authority as the March 29 Brexit day draws near, with some lenders being made to report twice a day, the FT said.
In February, the BoE said it will offer liquidity support for banks through additional indexed long-term repo operations on a weekly basis in March and April as part of plans to ease concerns of a cash shortfall for lenders that could arise from Brexit.