EU referendum: ECB could make public pledge to support markets in event of Brexit

The European Central Bank (ECB) is understood to be ready to publicly commit to support financial markets should Britain vote to leave the EU on 23 June 2016. Global markets are growing increasingly concerned that the UK might opt to leave the 28-country bloc this month after polls put the 'Leave' campaign firmly in the lead with less than 10 days until the vote.

The uncertainty generated by the prospect of a Britain-free EU has made its presence felt amid currencies as well, with both the pound and the euro coming under pressure.

The former, which on 10 June recorded its second-biggest drop of the year after tumbling 1.4%, on Tuesday (14 June) lost a further 0.57% against the dollar, trading as low as $1.4124.

According to sources cited by Reuters, the ECB would publicly announce its decision to backstop financial markets on 24 June, the day following the UK referendum. The timing of the decision would be aimed at deliver what could be a much-needed injection of confidence to European investors.

"There will be a statement to do whatever it takes to maintain adequate market liquidity," an ECB source was quoted as saying.

The report added that the ECB and the Bank of England would negotiate the opening of so-called swap-lines, which would allow both banks to swap euros and sterling, which would in turn make near-unlimited funding in both currencies available to the two central banks.

The ECB and the US Federal Reserve implemented a similar agreement in the immediate aftermath of the 9/11 attacks in 2001 and following the 2008 financial crisis. Last month, Threadneedle Street officials said it was possible that "heightened uncertainty" generated by the vote could make it harder for banks to access their usual sources of foreign currency.

A number of meetings involving high-profile figures of European central banks are scheduled for the week of the referendum. ECB President Mario Draghi and BoE Governor Mark Carney will, along with European peers, meet in Frankfurt on the day of the vote, while the world's central bank chiefs from around the globe will gather in Switzerland a couple of days later.