The Bank of England Governor Mark Carney said that the UK and EU should “do all things to avoid” a no deal scenario but that the banks were ready and have been planning for “very difficult circumstances”.
This comes ahead of Theresa May’s meeting with the French President Emmanuel Macron at his summer retreat, Fort de Bregancon, on a small island off the French Mediterranean coast.
The Prime Minister is ending her break in the Italian Lakes a day early in the hope of winning over Macron.
Carney warned that a no-deal Brexit would be “highly undesirable”.
"I think the possibility of a no deal is uncomfortably high at this point," Carney told BBC Radio 4 Today.
"It is highly undesirable. Parties should do all things to avoid it.
"As a consequence of that, a disruption to the level of economic activity, higher prices for a period of time.
"The UK financial system has tripled the amount of capital they had over the course of the last several years, they have increased the amount of liquidity - the money they have on a day-to-day basis - by 10 times over the course of the last several years.
"We have meticulously gone through the types of risk associated with a no deal Brexit to make sure the institutions are in a position.
“So we've gone from the fastest to the slowest growing in the G7, we've had a big shift in sterling - 17 percentage points - and we went through the latter half of 2016 and last year with a real pay squeeze on British households, which we're just getting out of." Carney said.