Bank of England (BoE) has asked UK banks to hold adequate capital buffers in preparation for Britain’s departure from the European Union next year.

The aim is to ensure a smooth transition, even in case of a no-deal Brexit, and to lower risks.

In this context, BoE deputy governor Sam Woods said that “just in case things go badly we have been working with firms to ensure they have in place liquidity sufficient to accommodate a severe dislocation in financial markets”.

Besides, Woods also encouraged banks located in other EU states to opt into UK’s Temporary Permissions Regime. The regime will enable firms with existing passporting authorisation to carry out operations in the UK for an additional three years, even if the UK quits the bloc without an implementation period.

“We encourage all firms to opt into the regime because it will provide certainty until March 2022, independent of the existence and duration of any wider implementation period. This is a straightforward, common sense way of lowering the risk of disruption to the City of London.”

At the same time, Woods also asked EU to make efforts to avoid disruption to financial contracts after Brexit, in line with measures taken by the UK government.

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“To allow for those firms exiting the UK to wind down their operations here in an orderly manner, the UK government is drafting temporary recognition and run-off regimes so that contracts written before Brexit can still be appropriately cleared and serviced after it, and I hope Parliament will support this. I strongly urge colleagues in the EU27 to take similar steps,” Woods stated.