Banks in £50bn bail-out boost

Published 24th Apr 2008

The Bank of England has announced details of a £50bn plan to tackle the credit crisis…

Banks will be able to swap potentially risky mortgage debts for secure government bonds to enable them to operate during the credit squeeze.

Mervyn King, Governer of BoE, said: “The scheme aims to improve liquidity in the banking system. It should also increase confidence in financial markets”.

Simon Tyler, of Chase de Vere Mortgage Management, welcomed the move: “There is a £50bn-£70bn undersupply of funds, which means lenders are raising rates on mortgage deals.
Certainly anything that's going to provide some sort of way in which the banks can start to lend to each other and move the machine forward is going to be massively welcomed”.

Earlier action needed
Michael Bolton, chief executive of mortgage specialist Edeus, slammed the lack of proactivity: “The current situation is the worst banking crisis for 80 years, but the planned move will allow lenders to shore up their balance sheets, rather than pass on the effects to householders in cheaper mortgage deals.

"There real shame is that if we had acted in September or October we probably could have pre-empted a rapid deterioration in arrears and repossession statistics”.
The Council of Mortgage Lenders (CML) said it "welcomed any indication of a change of tack" but would not comment further until it had seen published details.

Source: ' Move Channel Ltd '

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