C2C
21 april 2008, 11:13
Bank details £50bn lending boost
The Bank of England has announced details of a plan to help prevent the credit crisis causing more damage to the UK banking system and economy.
Banks will be able to swap potentially risky mortgage debts for £50bn of secure government bonds to enable them to operate during the credit squeeze.
The Bank's governor, Mervyn King, said the scheme aimed to improve liquidity in the banking system.
It should also increase confidence in financial markets, he added.
Under the scheme, banks will be allowed to swap their "high quality" mortgage debts for government securities.
This is a banking-market bail out of an ambition we haven't seen in this country since the early 1970's and possibly longer than that
The swap will be for a period of one year and may be renewed for a total of three years.
It will only apply to mortgage debts on banks' books at the end of 2007 and the swaps cannot be used to finance new lending.
Banks pleased
Banks welcomed the central bank's "innovative and unique policy response" and said they were confident the move would go some way to free up credit markets.
"The banks are participating in this arrangement and expect it to make a significant contribution to alleviating the pressures in the UK money markets," the British Bankers' Association said.
British banks have become increasingly unwilling to lend to one another as a result of the credit crisis, which was triggered by massive losses for banks involved in the US sub-prime mortgage market.
Many investors, concerned at what happened to sub-prime mortgages in the US, no longer want UK mortgage-based assets.
The disappearance of this market has deprived banks of tens of billions of pounds of finance for mortgage lending.
The move should free up bank balance sheets and enable them to lend more to consumers and home buyers.
U-turn?
However, the BBC's business editor Robert Peston said the move could be seen as a major U-turn by the Bank.
Until now, the Bank of England has been more conservative in its financial support for banks than the Federal Reserve in the US and the European Central Bank.
In the US, the Federal Reserve took similar action with a $200bn programme to boost liquidity in financial markets last month.
Vince Cable, the Liberal Democrats' Treasury spokesman, had warned that the move could effectively nationalise the banks' losses.
But Mr King said the plan ensured that the risk of losses on the loans remained with the banks.
Chancellor Alistair Darling said on Sunday the plan was needed to stop the UK's financial crisis worsening.
Mr Darling will give details of the plan to MPs in the House of Commons later.
http://news.bbc.co.uk/2/hi/business/7357880.stm
Waarom moeten banken gered worden? Waarom moet het kapitalisme een uitzondering maken op banken? Wanneer een gewoon bedrijf failliet gaat, gaat het failliet - punt, gedaan.
De belastingbetaler in Europa en de VS heeft nu al meer dan een half *triljard* dollar moeten ophoesten om dit corrupte systeem te redden.
The Bank of England has announced details of a plan to help prevent the credit crisis causing more damage to the UK banking system and economy.
Banks will be able to swap potentially risky mortgage debts for £50bn of secure government bonds to enable them to operate during the credit squeeze.
The Bank's governor, Mervyn King, said the scheme aimed to improve liquidity in the banking system.
It should also increase confidence in financial markets, he added.
Under the scheme, banks will be allowed to swap their "high quality" mortgage debts for government securities.
This is a banking-market bail out of an ambition we haven't seen in this country since the early 1970's and possibly longer than that
The swap will be for a period of one year and may be renewed for a total of three years.
It will only apply to mortgage debts on banks' books at the end of 2007 and the swaps cannot be used to finance new lending.
Banks pleased
Banks welcomed the central bank's "innovative and unique policy response" and said they were confident the move would go some way to free up credit markets.
"The banks are participating in this arrangement and expect it to make a significant contribution to alleviating the pressures in the UK money markets," the British Bankers' Association said.
British banks have become increasingly unwilling to lend to one another as a result of the credit crisis, which was triggered by massive losses for banks involved in the US sub-prime mortgage market.
Many investors, concerned at what happened to sub-prime mortgages in the US, no longer want UK mortgage-based assets.
The disappearance of this market has deprived banks of tens of billions of pounds of finance for mortgage lending.
The move should free up bank balance sheets and enable them to lend more to consumers and home buyers.
U-turn?
However, the BBC's business editor Robert Peston said the move could be seen as a major U-turn by the Bank.
Until now, the Bank of England has been more conservative in its financial support for banks than the Federal Reserve in the US and the European Central Bank.
In the US, the Federal Reserve took similar action with a $200bn programme to boost liquidity in financial markets last month.
Vince Cable, the Liberal Democrats' Treasury spokesman, had warned that the move could effectively nationalise the banks' losses.
But Mr King said the plan ensured that the risk of losses on the loans remained with the banks.
Chancellor Alistair Darling said on Sunday the plan was needed to stop the UK's financial crisis worsening.
Mr Darling will give details of the plan to MPs in the House of Commons later.
http://news.bbc.co.uk/2/hi/business/7357880.stm
Waarom moeten banken gered worden? Waarom moet het kapitalisme een uitzondering maken op banken? Wanneer een gewoon bedrijf failliet gaat, gaat het failliet - punt, gedaan.
De belastingbetaler in Europa en de VS heeft nu al meer dan een half *triljard* dollar moeten ophoesten om dit corrupte systeem te redden.