The Bank of England may need to call on other central banks for foreign currencies if fears over Britain’s referendum on European Union membership hit the world’s biggest currency trading centre, the International Monetary Fund said on Friday.
The IMF, which published an annual report on Britain’s economy on Friday, welcomed a promise by the BoE to provide more sterling funds if needed, and said the June 23 referendum could also trigger currency market tension.
“The Bank of England has appropriately announced plans to hold additional liquidity auctions in the weeks around the referendum,” the IMF said. “There may also be a need to activate swap facilities with other major central banks in the event of a shortfall of foreign exchange liquidity.”
The BoE said on Thursday that possible “heightened uncertainty” due to June’s vote may make it harder for banks to tap their usual sources of foreign currency, and that it would keep its operations, including swap lines, under review.
The BoE holds weekly auctions of U.S. dollars and has agreements with the central banks of the United States, the euro zone, China, Japan, Canada and Switzerland to provide each other foreign currency in case of market tensions.
The foreign currency can then be lent temporarily to private financial institutions in exchange for collateral.
Finance ministers and central bank governors from the G7, seven of the leading advanced economies, are due to meet in Japan next week.
IMF managing director Christine Lagarde said on Friday that global economic risks from a possible British vote to leave the EU had been high on the list of concerns among finance ministers she had met in recent months