NEW! Investment Companies Centre

Banks want BoE liquidity scheme extended

News for Spread Betters

PreviousPrevious
NextNext

There's a new Investor Edition of CMC Markets' spread betting platform... and it's exclusive to DigitalLook.com users...

Get full details about Marketmaker:Investor Edition here. Advertisement

By Lee Wild

Date: Friday 11 Jul 2008

LONDON (ShareCast) - Some of Britain’s biggest banks are expected to sit down with the Bank of England today in an effort to readdress liquidity issues brought on by the credit crunch.

High street lenders want the central bank’s Special Liquidity Scheme, introduced in April, widened in order to free up the flow of cash within the financial sector.

Lending between banks has all but dried up as they worry about rival’s exposure to risky assets. The collapse of the US sub-prime mortgage market has forced many to write off billions of pounds of loans.

They say the Bank’s £50bn scheme has failed to bring down Libor, the rate at which banks lend to each other, or mortgage costs.

The plan to swap bank mortgage debt for government bonds was announced by Bank of England governor Mervyn King less than three months ago.

It allowed banks to swap illiquid assets of sufficiently high quality for Treasury Bills over a one-year period and with an option to renew for a total of up to three years.

“The Bank of England's Special Liquidity Scheme is designed to improve the liquidity position of the banking system and raise confidence in financial markets while ensuring that the risk of losses on the loans they have made remains with the banks," said King at the time.

Experts now reckon the £50bn scheme will have to double to £100bn.

Digital Look have been voted
"Best Research and Information Provider"

4th Floor, Bankside House, 107 Leadenhall Street, London EC3A 4AF.
Registered in England and Wales (registered no. 3678570).