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Crosby to head mortgage funding review

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Date: Wednesday 09 Apr 2008

LONDON (ShareCast) - Former HBOS chief executive James Crosby has been appointed to head up a new review into ways of improving liquidity in the mortgage market following the near drying up of the inter-bank lending market because of the credit crunch.

Crosby, who was in charge of HBOS between 2001 and 2006, will head a team consisting of outside experts and officials from the Bank of England and Financial Services Authority. The review body will present its report to chancellor Alistair Darling in the summer.

The move follows heavy criticism of the UK government, Bank of England and FSA for their handling of the Northern Rock crisis.

The Newcastle-based bank was heavily reliant on borrowing from other banks to fund its mortgage lending and when this source of funding dried up it had to be rescued and nationalised to stop its collapse.

Funding, though, remains difficult and this month has seen a spate of lenders withdraw mortgage products due to heavy demand from borrowers looking to remortgage. HSBC subsidiary First Direct stopped lending to non-customers after it was swamped with applications while last week Abbey withdrew the last 100% mortgage on offer.