Author Topic: ?UK Banks Will Need $200bn Aid From BoE?  (Read 2264 times)

Offline furtune

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?UK Banks Will Need $200bn Aid From BoE?
« on: April 21, 2008, 01:29:10 PM »
Former Bank of England policy maker, Willem Buiter, said the central bank would need to offer loan swaps to financial institutions of at least ?100bn ($200bn) to kick-start the United Kingdom mortgage market.

The central bank, the Treasury and Prime Minister, Gordon Brown?s office, may unveil a plan to swap mortgage-backed securities for government bonds as soon as next week, which the British Broadcasting Corporation reported on Friday will total 50 billion pounds. Banks including HBOS Plc have curbed lending and raised the cost of mortgage loans even after policy makers cut the benchmark lending rate three times since December to help avert a UK recession.

?In total, they would have to do not in one big go at least 100 billion for it to really actually make a difference to the liquidity position of banks, but also act as the catalyst for getting that market going again,?? Buiter said in an interview. He served on the bank?s rate-setting panel from 1997 until 2000.

The plan?s success ?all depends on the scale,?? Buiter, a London School of Economics professor, said on Friday. ?If they do five billion (pounds) it?s not going to do much. If they do 55 billion it would help deal with the overhang of illiquid mortgage-backed securities that mortgage lenders have on their balance sheet and prevent them from engaging in any new lending.??

The United States Federal Reserve last month made up to $200bn available to banks in return for debt including mortgage-backed securities and in December created a lending vehicle to make credit available to banks as an alternative to borrowing at its discount rate, which may carry a stigma.

To date, the Bank of England widened its collateral requirements just for three-month lending. It only accepts top- rated government securities at its weekly auctions.

The BBC said the mortgage rescue plan involves government bonds with a maturity of up to one year. They would be rolled over for up to three years, it said.

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?UK Banks Will Need $200bn Aid From BoE?
« on: April 21, 2008, 01:29:10 PM »

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Offline beibee

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Re: ?UK Banks Will Need $200bn Aid From BoE?
« Reply #1 on: April 21, 2008, 01:33:21 PM »


is this good news to those in uk?
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Re: ?UK Banks Will Need $200bn Aid From BoE?
« Reply #1 on: April 21, 2008, 01:33:21 PM »

 

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