UK lines up euro access to ease hard Brexit
The Bank of England and the European Central Bank are to set up currency swaps to let financial institutions in the UK access euro in the event of market instability due to a hard Brexit.
Even though central banks, including the Central Bank of Ireland, believe they have plugged most of the market infrastructure holes and regulations around Brexit, all have warned there could be large shifts in the value of the pound if Britain leaves the EU without a deal.
Under the new swap agreement, the Bank of England will hold euro auctions on a weekly basis to lend to British banks and the European Central Bank will receive sterling from the BoE in exchange for the euro.
The ECB said it would stand ready to lend pounds to euro-area banks, if a need arose.
"The activation marks a prudent and precautionary step by the Bank of England to provide additional flexibility in its provision of liquidity insurance, supporting the functioning of markets that serve households and businesses," the ECB said.
With the March 29 deadline for a Brexit deal approaching fast, there is still no final deal on the table - which means that a hard Brexit, under which the UK would leave without a deal, remains a risk.
In the event of a no-deal outcome, the pound could be hit hard, with some economists forecasting that it could fall to parity against the euro.
Ireland is the most exposed country in the European Union to Brexit in terms of economic impact.
Exports to the UK were worth €16.1bn in 2018, while imports totalled €19.8bn.
The uncertainties surrounding Brexit have hit investment in the UK economy.