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Would money market funding evaporate in the event of a Brexit vote?

Nicholas Wallwork

Nicholas Wallwork

Editor-in-Chief
Staff member
Premium Member
As we move ever closer towards the UK referendum on EU membership there are concerns that a vote in favour of Brexit could result in support for worldwide money markets evaporating. We only need to look back at the 2008/9 crisis which resulted in a worldwide economic downturn to see the impact of reduced funding

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nmb

Well-Known Member
There is no doubt that many money market investors will sit on the sidelines in the event of a Brexit vote. However, if the early indications this evening are anything to go by the remain campaign seems to have won the day although it may still be a close result.
 
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lookinginvest

Member
At the first sign of trouble investors in money markets will either retreat to the sidelines or increase the cost of providing finance. Either way, this will certainly have an impact upon many areas of investment and day-to-day business.
 
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nmb

Well-Known Member
It seems that the Bank of England already had an array of contingency plans in place in the event of a Brexit victory. Mark Carney, the Gov of the Bank of England, today confirmed that the Bank has a £250 billion facility to pump into the money markets at the first sign of trouble. This should ensure short to medium term liquidity and keep the wheels of commerce moving.
 
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Longterminvestor

Administrator
While the Bank of England's promise of up to £250 billion of funding in the immediate aftermath of the referendum decision is obviously helpful, this is only a short-term solution. Markets will need to find a level and then investors will need to start and rebuild their confidence again.
 
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lookinginvest

Member
It has been rumoured that the Bank of England has further contingency plans behind-the-scenes but there is also talk of a further reduction in UK base rates. The yield on UK gilts fell below 1% today which would seem to indicate an immediate reduction in UK base rates.
 
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nmb

Well-Known Member
It is not just the UK which cannot afford money markets to freeze because the likes of Europe and the US need to maintain liquidity and bring some order back to the markets. So, while Brexit is being painted as a UK problem it is perhaps more of a problem for the European Union as contagion could see other member states also demanding similar referendums.
 
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