High street banks told to stockpile cash in case of Brexit
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High-street banks are stockpiling cash for Friday under orders of the financial regulator, in case a vote to leave the EU prompts mass withdrawals.
With the memory of customers queueing outside Northern Rock branches at the start of the financial crisis still haunting UK authorities, the Bank of England’s Prudential Regulation Authority has kept in close contact with the largest banks, including Lloyds Banking Group and the Royal Bank of Scotland, to make sure all cash machines and banking websites are operational and that they are prepared for the aftermath of a Brexit vote in Thursday’s referendum.
As well as the amount of cash they are holding, banks’ IT systems and infrastructure have also come under the scrutiny of the PRA, with lenders being quizzed on how well prepared they are for Thursday and Friday.
The BoE has said that uncertainty about the EU referendum is the biggest risk to the UK’s short-term financial stability, and “possibly” the biggest risk to international markets too.
With the polls still too close to call, George Soros, who made a fortune betting against the pound in 1992 when the UK crashed out of the European Exchange Rate Mechanism, joined the chorus of financiers forecasting a plunge in sterling’s value if there were a vote to leave the EU. Britain risked another “black Friday”, Mr Soros said.
Making sure the banks have enough cash to cope with mass withdrawals around the time of big events is standard practice for the PRA. It took similar steps before the Scottish independence referendum in 2014.
Some banks have said they are avoiding critical system updates over the period of the referendum.
Giles Williams, a partner at consultancy KPMG, said that banks were being “extremely careful” about undertaking technology updates right now, putting off non-essential work.
However, RBS, which received a £56m fine from the PRA and Financial Conduct Authority after an IT upgrade went wrong in 2012, is in the process of overhauling a large part of its ATM network, replacing cash machines in 300 of its branches in England and Wales.
An RBS banker said that while some activities are put on hold at the time of big events, no problems were forecast in relation to cash machines because the migration process “is so low-risk”.
The BoE declined to comment on specific plans but said: “We are engaging in more intensive supervision with all our big institutions.”
Andrew Bailey, the head of the PRA, has previously said that the regulator was in daily discussions with banks about risks posed by the EU referendum.
Link, which operates the UK’s ATM network, said it was working “to ensure everyone can enjoy safe, reliable and easy access to their cash and we are confident that whatever way the vote goes, ATMs will operate as normal up and down the country”.
London-based legal firms as well as the big banks have said they will run “war rooms” on the night of June 23 and during the day of June 24, to monitor developments and advise clients.
Clifford Chance, one of London’s top law firms, said it was setting up a “24/7 Brexit rapid response unit” to respond to client queries in London, Europe, Asia-Pacific and the Americas.
“The facility will be staffed from the opening of the polls for as long as necessary,” said Clifford Chance’s senior partner, Malcolm Sweeting.
Dechert, another law firm, said it had set up a Brexit hotline for existing and new clients.
TransferWise, a money transfer business, has also announced that it “will limit GBP transfers later in the week”.
Additional reporting by Sarah Gordon
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