BREXIT: UK banks to be offered additional liquidity around EU referendum

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum.

Extra indexed long-term repo (ILTR) operations will take place on 14, 21 and 28 June, to run alongside the Bank of England's regular monthly ILTR operations, according to the announcement (1-page / 153KB PDF). ITLR operations give banks, building societies and broker-dealers the opportunity to exchange certain less liquid assets for liquidity from central bank reserves, and allow banks to balance their ability to make long-term loans from on-demand or short-term deposits.

The central bank operates a range of liquidity insurance facilities including regular weekly US Dollar repo operations, which will continue to operate as usual around the referendum on EU membership, which is due to take place on 23 June. It will "continue to monitor market conditions carefully" for financial stability risks around this period, according to the announcement.

Banking law expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, said that the announcement was "pragmatic, short-term planning from the Bank of England" given the uncertainty surrounding the possibility of a so-called 'Brexit' vote.

"It is not clear at this stage, however, how long such uncertainty would remain following an 'out' vote," he said. "The Bank of England may well need to look further ahead to provide additional support in the mid-term as the consequences of the UK leaving Europe are further explored and identified."