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UK Banks Set For All-night Vigil Over 'Brexit' Fears

Bankers fear that a 'Leave' vote could lead to the most volatile markets in decades, especially in currency markets but also in bonds, derivatives and equities

Photo Credit : Reuters

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The financial markets in the UK are bracing for a feared "freeze" in the event of 'Brexit' or Britain's exit from the 28-nation European Union in Thursday's historic referendum.

Bankers fear that a "Leave" vote could lead to the most volatile markets in decades, especially in currency markets but also in bonds, derivatives and equities.

Senior executive at all major banks, including Citigroup, JPMorgan, Goldman Sachs and Morgan Stanley, are expected to be on an overnight vigil in their London offices to monitor the developments.

A vote in favour of the UK withdrawing from the 28-nation economic bloc could mean that the pound sterling's exchange rate would fall "perhaps sharply", the Bank of England's monetary policy committee (MPC) recently said.

The bank remains on high alert to intervene if markets freeze, according to The Times.
Banks based in the City of London, the financial hub of the British capital, including UBS, HSBC, Morgan Stanley and Bank of America Merrill Lynch, have written to clients telling them to prepare for disruption tomorrow once the EU referendum result is declared.

UBS analysts warned that 350 billion pounds could be wiped off the value of leading companies as the FTSE 100 goes into free fall.

HSBC told clients, "This is an important event which will most likely impact financial markets through increased price volatility or lower market liquidity. Given our previous experience of events with significant market impact, we are writing to our clients to alert you to the risk of disruption to services as a consequence".

The banks are believed to have issued the client notes because they fear a re-run of the panic in January, 2015, when the Swiss National Bank unexpectedly abandoned its currency peg with the Euro.

In only 20 minutes, the Swiss franc appreciated by 28 per cent and banks found themselves unable to cope.

The financial world has been in favour of a "Remain" vote to ensure the UK retains as much of its access to the single market as possible.

Meanwhile, the pound rose on polling day itself though trading remained weak. European stock markets were also mostly higher today morning, although there were no big moves.

Investors and traders are expecting moves in currency markets after 10 pm when polls close and some privately commissioned exit polls by hedge funds start pouring in.

The Bank of England has emphasised that it is ready to ensure markets function after a Brexit vote.

Polling stations across Scotland reported a steady flow of voters, encouraged by the bright sunshine in the region.

The flow has been more sluggish in other parts as the weather forecast for polling day remains mixed, with thunderstorms causing flooding in some parts of the country.

One voter from Chessington tweeted that she had to be carried into a flooded polling booth to cast her "remain" vote.

A low turnout is likely to benefit the Leave side, however, the general expectation is of a bigger turnout than the 2015 general election which was around 66 per cent.

After the referendum with polls closing at 10 pm local time, sealed ballot boxes will be collected and transported to the count venue for each of the 382 local counting areas.

These represent all 380 local government areas in England, Scotland and Wales, plus one each for Northern Ireland and Gibraltar.

Individual areas' results will then be declared throughout the night, along with results from 11 regional counts.

The UK's Electoral Commission estimates a final result around breakfast time tomorrow.

In a departure from the norm, no major broadcasters have commissioned any exit polls over concerns about accuracy following the fiasco of the last general elections, when a hung Parliament had been predicted wrongly instead of a big Conservative party majority.

The result will be declared by Jenny Watson, the chair of the UK's Electoral Commission and the referendum's chief counting officer, at Manchester Town Hall tomorrow morning.

The European Union is made up of 28 countries who have come together for trade and security.

It was originally set up as the European Economic Community in 1958 with six members -- Belgium, Germany, France, Italy, Luxembourg and the Netherlands.

The EEC changed its name to the European Union (EU) in 1993. The UK had joined the EEC back in 1973. There has only been one other UK-wide referendum on the issue of EU membership, in 1975 when the country voted to stay in the European Community.

Eligible voters in today's referendum include anyone over the age of 18 who is a British citizen resident in the UK and UK nationals who have lived abroad for less than 15 years.

Citizens of Ireland, Malta and Cyprus resident in the UK can vote as can Commonwealth citizens resident in the UK and Gibraltar, including Indians.

(PTI)


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