LONDON: Europe's financial system faces "potential risks" to its stability arising from a no-deal Brexit, the Bank of England warned Tuesday, as it extended its weekly lending facilities to include euros.
With just 24 days to go until Britain is set to leave the European Union, the BoE said businesses and households across Britain and the EU were vulnerable.
The BoE said it had activated a swap line with the European Central Bank, which will provide euros in exchange for British pounds.
Brussels and London are furiously trying to steer away from a dreaded "no-deal" divorce that could wreak havoc on global markets.
The BoE warned Tuesday that "some disruption to cross-border services is possible and, in the absence of other actions by EU authorities, some potential risks to financial stability remain.
"Although these would primarily affect EU households and businesses, they could also be expected to spill back to the UK in ways that cannot be fully anticipated and mitigated," it added in a statement.
The British central bank made the remarks in minutes from its Financial Policy Committee (FPC) meeting that was held on February 26.
The BoE also said it was further stepping up its lending facilities for commercial banks over the next few months.
A week after the bank said it would increase the frequency of existing market-wide sterling cash loans from monthly to weekly, the BoE on Tuesday added that this would be extended to euros.
"The FPC welcomes the recent Bank decision to increase the frequency of the Bank's sterling liquidity operations and to initiate a new weekly Liquidity Facility in Euros (LiFE), alongside the existing weekly dollar lending facility," it said.
The European Central Bank said in a separate statement that the BoE's euro facility was a "prudent and precautionary step" aimed at supporting the smooth functioning of markets that serve households and businesses.
Eurozone central banks would also be ready to lend British pounds to commercial lenders in the single currency zone, the ECB said.
Bank of England governor Mark Carney last week said that such liquidity measures were "part of normal contingency planning" and that commercial banks were functioning well.
The central bank carried out the same measure ahead of and following Britain's referendum on leaving the EU in June 2016.
This helps banks and the wider financial industry keep ticking over during periods of market turbulence.
Similar lending was also carried out in 2008 during the global financial crisis.
Britain is on course to leave the EU on March 29, although there has been increasing talk of a possible delay.
Ahead of Brexit, authorities in Britain, including the Bank of England, have also agreed with the United States to maintain how multi-trillion-dollar financial transactions are carried out between the two countries.
The agreement concerns trades of derivatives -- securities whose value is based on an asset such as currencies, stocks and commodities.
The EU's chief Brexit negotiator Michel Barnier meets Britain's negotiating team on Tuesday as both sides seek a breakthrough.
The sitdown comes after Barnier said on Saturday that the EU was ready to give London further guarantees to help push a troubled divorce deal through British parliament.
Barnier also suggested European leaders would be amenable to a short "technical" delay in Britain's departure from the EU, in order to give parliament time to formally ratify a final divorce deal.
His small overture to Britain has raised hopes that both sides can find a solution, including to the so-called "backstop" plan for the Irish border, a major sticking point for pro-Brexit MPs.