The European Central Bank and the Bank of England activated a standing currency swap line, stepping up their preparations for Britain's possible departure from the EU later this month. 

Under the swap agreement, the Bank of England will offer to lend euro to UK banks on a weekly basis and the ECB will receive pound sterling from the Bank of England in exchange for euro. 

"The activation marks a prudent and precautionary step by the Bank of England to provide additional flexibility in its provision of liquidity insurance, supporting the functioning of markets that serve households and businesses," the ECB said in a statement. 

"As part of the same agreement, the Eurosystem would stand ready to lend pound sterling to euro area banks, if the need arises," the ECB added.

Meanwhile, the Bank of England has warned that Europe's financial system faces "potential risks" to its stability arising from a no-deal Brexit. 

With just 24 days to go until Britain is set to leave the European Union, the Bank of England said businesses and households across Britain and the EU were vulnerable. 

Brussels and London are furiously trying to steer away from a dreaded "no-deal" divorce that could wreak havoc on global markets. 

The Bank of England warned today that "some disruption to cross-border services is possible and, in the absence of other actions by EU authorities, some potential risks to financial stability remain. 

"Although these would primarily affect EU households and businesses, they could also be expected to spill back to the UK in ways that cannot be fully anticipated and mitigated," it added in a statement. 

The bank made the remarks in minutes from its Financial Policy Committee (FPC) meeting that was held on February 26. 

The Bank of England also said it was further stepping up its lending facilities for commercial banks over the next few months. 

A week after the bank said it would increase the frequency of existing market-wide sterling cash loans from monthly to weekly, the Bank of England today added that this would be extended to euros. 

"The FPC welcomes the recent bank decision to increase the frequency of the bank's sterling liquidity operations and to initiate a new weekly Liquidity Facility in Euros (LiFE), alongside the existing weekly dollar lending facility," it said.

The European Central Bank said in a separate statement that the Bank of England's euro facility was a "prudent and precautionary step" aimed at supporting the smooth functioning of markets that serve households and businesses. 

Euro zone central banks would also be ready to lend British pounds to commercial lenders in the single currency zone, the ECB said.

Bank of England governor Mark Carney last week said that such liquidity measures were "part of normal contingency planning" and that commercial banks were functioning well. 

The Bank of England carried out the same measure ahead of and following Britain's referendum on leaving the EU in June 2016. 

This helps banks and the wider financial industry keep ticking over during periods of market turbulence. 

Similar lending was also carried out in 2008 during the global financial crisis. 

Britain is on course to leave the EU on March 29, although there has been increasing talk of a possible delay. 

Ahead of Brexit, authorities in Britain, including the Bank of England, have also agreed with the US to maintain how multi-trillion-dollar financial transactions are carried out between the two countries. 

The agreement concerns trades of derivatives – securities whose value is based on an asset such as currencies, stocks and commodities.