8
Oct
Government unveils banking liquidity plan
Chancellor of the exchequer Alistair Darling has announced a new
plan to bolster the UK financial sector, which includes making
available £200 billion of extra liquidity.
Mr Darling revealed today that the government will provide £50
billion in capital to the largest institutions in return for stakes
in them.
In addition to this, there will be another £200 billion of
liquidity available to them via the Bank of England, something that
could increase the supply of mortgage finance.
Commenting on this move, the chief executive of money brokers
Tullett Prebon, Terry Smith, told the BBC: "They've [banks and
building societies] got additional capital now if they want it,
they've got an unlimited source of liquidity."
The measure is the second initiative launched through the Bank of
England to help high street institutions overcome their
unwillingness to lend to each other during the credit crunch.
In April the Bank unveiled its initial Special Liquidity Scheme,
which offered up to £50 billion in funding by allowing for the
swapping of mortgage-backed securities for Treasury bills.
