BoE’s unveils £50 billion plan

Posted 2008-04-20

The Bank of England (BoE) has today unveiled a plan to allow banks to take government-backed bonds in exchange for mortgage-backed securities.

It is hoped that the £50 billion cash injection will allow banks to lend to one another and to consumers, following recent financial difficulties and has been backed by the British Bankers Association (BBA).

Mervyn King, the governor of the bank, says the aim of the scheme is to restore confidence in the banking system and financial markets.

"The BoEs 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," he said.

One of the conditions of the aid, is that banks will be required to give the BoE assets with a higher value than the bonds which they are receiving.

The BBA represents the views and interests of 223 banks in the UK

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