[...]The pound’s history as one of the most important global currencies has meant central banks have long held assets denominated in pounds that can be sold quickly to help curb swings in their own currency’s exchange rates.
But a poll by Central Banking Publications, a trade journal, suggests its status will be endangered by Brexit, with three-quarters of reserve managers predicting that central banks will collectively alter — and in all likelihood cut — their sterling holdings.
More than one-third of 80 people surveyed — managers working at central banks that hold €7tn in assets — indicated that they would reduce the sterling holdings they personally control.
A central bank exodus from sterling would weaken the currency and raise borrowing costs for the UK government, which has long benefited from the pound’s popularity as a reserve currency.
“It’s clear that reserve managers think global holdings of sterling will be impacted by Brexit,” said Nick Carver, publisher of Central Banking Publications.
“Quitting the EU is identified with uncertainty and volatility, which reserve managers tend not to like. They find Brexit disruptive, whether in terms of market movements, or changes to back-office and counterparty arrangements.” [...]
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