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Bank of England Reveals GBP185 Billion Loans to Banks

Wed, 04 Feb 2009

The Bank of England has revealed that it has lent £185 billion to financial institutions under its special liquidity scheme since April. The scheme was created to enable banks to temporarily exchange unwanted assets such as mortgage backed debt for UK Treasury Bills. 32 banks and building societies took advantage of the scheme, which is designed to kick start lending by eradicating the uncertainty created by the presence of liquid assets on the balance sheets.

The scheme was offered to banks until January 30th, but has since been extended as a result of the ‘substantial strains’ on the system. Assets are only eligible for exchange if the banks held them before December 31st 2007. In total, the Bank of England received assets from the banks valued at £287bn.

However, the continued global economic downturn has contributed to a continued cautiousness amongst financial institutions, prompting the implementation of further schemes from the Bank of England. One such scheme is the Discount Window Facility, allowing banks and building societies to borrow money using a wider range of unwanted assets than under the Special Liquidity Scheme. Under this scheme, banks may borrow for up to a year, compared to the month under the previous initiative.
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