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23/05/2016

ECB questions banks over ‘Brexit’ preparations

UK & Europe

ECB questions banks over ‘Brexit’ preparations

Mario Draghi. European Central Bank, September 2015.

[ECB European Central Bank/Flickr]

Supervisors of the European Central Bank are questioning banks over their preparations for a
possible British exit from the European Union and the ensuing reaction in foreign exchange markets, Handelsblatt reported on Wednesday (9 March).

The possible consequences of a ‘Brexit’ for financial markets and individual banks have become the top concern at the ECB over the last few weeks, the German newspaper reported.

One central banker, who declined to be named, described a Brexit as “the biggest risk to financial stability this year.”

Britain will hold an ‘in-out’ referendum on its continued EU membership on 23 June, with opinion polls showing Britons evenly divided on the issue.

The ECB supervisors want to check the readiness of banks for “extreme shifts” in forex trading and for possible losses for companies stemming from foreign currency loans, Handelsblatt said, citing unnamed sources.

“The bank’s supervisors will make more extensive enquiries in the coming weeks in order to make greater headway on this issue,” one unnamed insider told the paper.

It also quoted Andreas Dombret of Germany’s Bundesbank as saying “a potential Brexit is very dangerous” for financial stability.

The ECB, which holds a regular policy meeting on Thursday, was not immediately available to comment on the Handelslbatt report.

Background

During his campaign fro re-election in 2015, British Prime Minister David Cameron promised to renegotiate the UK's relations with the European Union and organise a referendum to decide whether or not Britain should remain in the 28-member bloc.

The British PM said he will campaign for Britain to remain in the EU after a two-day summit in Brussels where he obtained concessions from the 27 other EU leaders to give Britain “special status” in the EU.

But EU leaders had their red lines, and ruled out changing fundamental EU principles, such as the free movement of workers, and a ban on discriminating between workers from different EU states.

Cameron clinches reform deal after benefits compromise

UK Prime Minister David Cameron on Friday night (19 February) said he would campaign for Britain to stay in a reformed EU, after securing promises of treaty change and compromising on his demands over benefits for EU migrants and their children.

EurActiv.com

The decision on whether to stay or go could have far-reaching consequences for trade, investment and Great Britain's position on the international scene.

The campaign will be bitterly contested in a country with a long tradition of euroscepticism and a hostile right-wing press, with opinion polls showing Britons are almost evenly divided.

Timeline

  • 23 June: Referendum on the UK's membership of the EU