The Bank of England (BOE) is launching a new liquidity facilityin euros in the final few weeks before the scheduled date forBritain to leave the European Union (EU).

The bank said Tuesday that the weekly auctions from March 13 area “prudent and precautionary step” to allow U.K. lenders to accesseuro funding. The bank already offers dollar auctions on a similarbasis.

Although the prospects seem to be fading for a no-deal Brexit on March 29, the BOE's FinancialPolicy Committee (FPC) said “significant market volatility” is tobe expected in this scenario. Still, the central bank reiteratedthat the core banking system is strong enough to continuefunctioning properly and wouldn't amplify the disruption.

The FPC, which was set up after the 2008 crisis to spot risks tofinancial stability, said that EU households and businesses couldstruggle to access some banking and market services in a no-dealwithdrawal, ultimately raising the cost of doing business for banksthat could ripple back to the U.K.

For example, while U.K. and global banks have set up newentities to do business from within the EU, they are stillstruggling to transfer EU clients to the new divisions, the BOEsaid. Only 10 percent to 20 percent of most major firms' EU clientsare ready to enter into trades, according to the central bank.

Other keys points from the BOE are:

• The FPC decided to keep the U.K. banks' economic safety net,known as the countercyclical capital buffer, steady at 1 percent ofrisk-weighted assets.
• The BOE will add CYBG to its banking stress tests from2020.
• The bank has recently enlarged through a merger with VirginMoney.
• The bank will launch a pilot cybersecurity exercise in thesummer, focusing on disruption to payments systems.

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