The Bank of England warned on Thursday that Britain’s EU referendum next week was potentially the “largest risk” for world markets.

“The outcome of the referendum continues to be the largest immediate risk facing UK financial markets and possibly also global financial markets,” according to minutes from the bank’s June meeting.

“Were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply,” the minutes add.

Earlier, global central banks sounded the alarm over the risks posed by Brexit as polls continued to show the “Leave” campaign ahead with a week to go before the June 23 vote.

In a 15-hour relay of comments, the chiefs of the US Federal Reserve (Fed), the Bank of Japan, the Bank of Canada and the Swiss National Bank all cited the referendum on EU membership as being potentially disruptive to the global economy.

The IMF weighed in, saying that a British vote to break with the EU could stifle economic growth and weaken the ties that bind the eurozone. In a new report, the IMF warned that the 19-nation single-currency bloc already faced rising doubts from within that could loosen its bonds, including from tensions over the refugee crisis.

It said a pro-Brexit vote could exacerbate that trend.

Market volatility persisted, with the pound falling to a two-month low against the dollar. Sterling weakened against most of its 16 major peers, dropping to a three-year low against the yen.

Haruhiko Kuroda, governor of the Bank of Japan, said that central banks were in contact on Brexit, and that his institution could respond to any potential surge in dollar-funding costs.

“The Bank of Japan is closely exchanging opinions with the Bank of England and other central banks,” he told reporters. “We want to co-ordinate closely with domestic and overseas authorities and carefully watch how the vote will affect the international financial market and the global economy, including Japan.”

With almost all recent polls showing “Leave” in the lead, investors are focused on how financial guardians at the Fed, the European Central Bank and the Bank of Japan can stem market panic if the UK takes such a step.

Officials stress that liquidity facilities left over from the crisis era are available, and central bankers in countries such as Switzerland and Denmark said they were ready to act to stabilise their currencies.

•Credit: BusinessDAY South Africa, Bloomberg, Reuters, AFP.

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