Exclusive: Banks saw unprecedented step up in market supervision around UK vote

Mon Jul 4, 2016 3:03pm EDT
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By Patrick Graham

LONDON (Reuters) - Central banks raised oversight of currency markets to an unprecedented degree around Britain's shock vote to leave the European Union, demanding detailed updates from major trading desks every six hours throughout last week, industry sources said on Monday.

One senior banker with a major global bank said the calls, never before conducted as often or consistently, had been seen as a sign that officials were worried an "Out" vote could trigger the sort of financial sector problems not seen since the collapse of Lehman Brothers in 2008.

The U.S. Federal Reserve, the Bank of England and the European Central Bank all declined to comment on the calls, their conduct, content and aims.

But some officials pointed to a general promise by the Bank of England and others to increase supervision of markets around the vote and said the calls were chiefly evidence of greater - and so far successful - coordination of regulatory efforts by the world's big central banks.

The BoE said ahead of the vote it could ask banks for daily checks on their funding levels if need be. It has also become the norm for the ECB to check more regularly in times of stress with banks about short-term liquidity or the situation in currency or derivatives markets.

"These calls have been going on. They are reflective, I think, of a more systematic and modern approach from the regulators," said one industry source.

"If they make these things regular and keep to a proforma then it is easier to compare notes with other central banks on what is happening. You can infer also that there is an awful lot more conference calling going on between the central banks."

A second source, the senior banker, said he had been present on a handful of the calls to his bank, held consistently every six hours during major market business hours since the vote on June 23.   Continued...

A man walks past the Federal Reserve Bank in Washington, D.C., U.S. December 16, 2015. REUTERS/Kevin Lamarque/File Photo