European Central Bank ready to manage financial impact of Brexit vote

The European Central Bank said Friday it was closely monitoring financial markets in the wake of the British vote to leave the EU.

“The Central Bank, as part of the Eurosystem, ECB Banking Supervision and the European System of Financial Supervision more broadly, is closely monitoring the market impact and the banking sector”, the bank said in a statement on its Twitter account.

And the Federal Reserve added it was “prepared to provide dollar liquidity through its existing swap lines with central banks…to address pressures in global funding markets, which could have adverse implications for the United States economy”.

The ECB said it would “continue to fulfil its responsibilities to ensure price stability and financial stability in the euro area”.

As the vote raised far-reaching questions about Britain’s future economic growth prospects, the pound fell by as much as 10 percent to a 31-year low against the dollar in early trade and European shares were down close to 10 percent before recovering some ground.

The Bank of England “will not hesitate to take additional measures as required as markets adjust and the [British] economy moves forward”, Carney adds, indicating that the so-called Brexit will have no immediate impact on everyday life.

The British economy was already slowing ahead of the referendum and Carney has previously warned that it could go into recession in the event of a vote to leave the EU.

Angeloni stressed that creating a banking union in the EU had not been completed.

International Monetary Fund director Christine Lagarde said she supported commitments by both the ECB and The Bank of England to contain volatility.

The European Central Bank was expected to hold a governing council telephone conference call on Friday and make a statement later.

Switzerland’s central bank added that it had “intervened” in the foreign exchange market to stabilise the Swiss franc, considered a safe haven currency, following the Brexit verdict.

The Bank of Japan said it stood ready to work with other major central banks to inject ample liquidity to counter wild volatility in markets.