The Bank of England on Wednesday urged Britain’s retail lenders to prepare for the potential failure of EU-UK negotiations on agreeing a post-Brexit trade deal.
“The possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months,” the central bank said in a statement.
Sky News had earlier reported that BoE governor Andrew Bailey had approached several banking executives to request that they accelerate their no-deal preparations.
“It is fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face,” the BoE added on Wednesday.
“In performing that role, the governor meets the leadership of UK banks on a very regular basis.”
Trade negotiators from Britain and the EU embarked on a fourth round of post-Brexit negotiations starting on Tuesday, but no-one in London or Brussels expects a breakthrough this week.
The latest round of talks, held over cross-Channel video conferences, will conclude this Friday.
Britain officially left the bloc on January 31 but remains under EU rules until the end of the year while both sides try to thrash out terms of a new relationship.
Prime Minister Boris Johnson is not expected to ask for any extension to the transition period, putting the UK on track to leave the single market and EU customs union on December 31.
If no trade deal is in place by then, experts predict severe disruption to businesses already reeling from a coronavirus pandemic that no-one expected when Britain voted to leave the EU in June 2016.