The possibility of a no-deal Brexit is "uncomfortably high" and "highly undesirable", Bank of England governor Mark Carney has told the BBC, reports BBC.

Mr Carney said the prospect of the UK leaving the EU without a deal was "a relatively unlikely possibility, but it is a possibility".

He said it was "absolutely in the interest" of the EU and UK to have a transition period.

However, the financial system was robust and could withstand shocks. "We have made sure that banks have the capital, the liquidity that they need and we have the contingency plans in place, " he told the BBC's Today programme.

"There is a very broad range of potential outcomes to these Brexit negotiations and we are entering a crucial phase."

The pound declined on the currency markets in the wake of Mr Carney's comments, falling below the $1.30 mark, before recovering some ground.