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UK would need EU bank's help in chaotic no-deal Brexit scenario

If Britain faced a no-deal Brexit it would have to rely on the support of the European Central Bank to keep the country's financial system afloat, Sky News has learned.

According to multiple insiders, the Bank of England would have to activate crisis-era swap lines from other major central banks to ensure the City of London (LSE: CIN.L - news) can keep trading international currencies.

And some have raised the question over whether the ECB or Federal Reserve would actually consent to the scheme, leaving the UK at risk of financial chaos.

Swap lines are the little-known quasi-bailout scheme that kept key financial systems functioning during the financial crisis.

They involve central banks agreeing to exchange currencies if the private sector market freezes.

According to Paul Tucker, the Bank of England's deputy governor during the crisis, and one of the architects of the current set-up, they represent the plumbing of the international financial system.

"If you think about the underpinnings of the world in which we live, they include things like the US Navy keeping the sea lanes of the world open so that global trade in goods can function," he told Sky News.

"And the central banks having a network of swap lines so that the international monetary system can weather disturbances so that they are absolutely elemental to the world in which we live.

"If people were to face a shortage of euros or dollars, the Bank of England would need to borrow those euros and dollars from the ECB, from the Federal Reserve."

In other words, if there were a chaotic Brexit, the UK would almost certainly have to seek these swap lines from the ECB and Federal Reserve.

And while there are permanent facilities in place, there is a technical chance politicians could intervene and prevent their use.

Daniela Gabor, associate professor in economics at the University of the West of England, said: "One can never rule out some uncertain moment where political processes become so complicated that the ECB would be told you have to revoke these swap lines.

"But history has taught us that many things that are permanent that can be made impermanent if there is political will... if democratic politicians want to intervene, they can."