Britain’s banks have spurned the chance to stock up on cash offered by the Bank of England before Thursday’s EU referendum amid growing expectations in the City that the remain side will win the knife-edge vote.
With the pound rising to its highest level against the dollar since January, Threadneedle Street said that banks took up just £370m of a special loan facility designed to ensure that institutions do not run short of cash in the period leading up to and after the referendum.
The result of the second of three special auctions announced in March by the Bank’s governor, Mark Carney, showed demand for the liquidity injection fall from £2.4bn last week.
The low takeup was described by one banker as a sign that tensions were easing in the financial markets after last week’s turbulence caused by polls showing leave in the lead.
“Last week we were staring into the abyss,” one banker said. “There is an element of confidence now.”
Banks have been holding more cash and easily sellable assets in the run-up to the vote, so this has reduced their demand for any extra contingency funds. The Bank of England facility allows banks to borrow money for six months, provided they lodge collateral with Threadneedle Street and will offer a third tranche of cash on 28 June.
Bank share prices have been rising this week as the threat of a Brexit vote has appeared to fade.
Meanwhile, sterling has been climbing against both the US dollar and the euro after last week’s sharp falls. The pound climbed above the €1.30 level against the euro, and at one stage during the morning reached almost $1.48.
One sign of nervousness ahead of the referendum emerged from the Royal Mint, which said there had been a surge in sales of gold to individuals in the past month.
Chris Howard, the director of bullion at The Royal Mint, said: “As we head towards the European referendum vote this week, our trading platform has seen a significant upsurge in traffic with a 32% increase in transactions compared to the same period the previous month.”
Britain’s manufacturers have also been showing signs of resilience ahead of the Brexit vote, according to the latest snapshot of industry from the CBI.
The monthly report from the employers organisation showed that order books had strengthened and companies expected the recent pickup in output to continue for the next three months.
