The UK's banks can withstand an even worse economic shock than the one they are currently going through and still continue to lend to households and businesses, the Bank of England has said.

It said that banks have built up substantial buffers since the financial crisis more than a decade ago, which are helping them get through the economic problems sparked by the pandemic.

The central bank's Financial Policy Committee added that ahead of a potential no-deal Brexit most risks to the UK's financial stability have been mitigated, but warned that "some disruption to financial services could arise".

The committee said: "Reflecting the extensive preparations by UK authorities and the financial sector, the FPC (Financial Policy Committee) continues to judge that most risks to UK financial stability that could arise from disruption to the provision of cross-border financial services at the end of the transition period have been mitigated."

It added: "Financial stability is not the same as market stability or the avoidance of any disruption to users of financial services.

"Some market volatility and disruption to financial services, particularly to EU-based clients, could arise.

"Irrespective of the particular form of the UK's future relationship with the EU, and consistent with its statutory responsibilities, the FPC will remain committed to the implementation of robust prudential standards in the UK."

Bank of England Governor Andrew Bailey has said that his officials have "a lot" in their armoury if a no-deal Brexit sparks a similar market shock to what happened in March during the first days of Covid-19.

Mr Bailey, who stressed he was not predicting such a market reaction, said: "We have a very substantial array of responses that we can take, and in any situation like that we will put them to work."