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Bank of England launches mortgage scheme
21 April 2008
A new scheme has been launched by the Bank of England in a bid to ease the credit squeeze on lenders.
The organisation is to permit banks to temporarily switch their high quality mortgage-backed and other securities for UK Treasury Bills.
Mervyn King, governor of the Bank of England, said: "The Bank of England's 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."
Starting today, the Bank said that the swaps are for 12 months and are only for assets which existed at the end of last year.
It said that the responsibility for the losses on any loans will remain with the banks in question.
Michael Coogan, director general of the Council of Mortgage lenders, said that he welcomed the move.
"Mortgage assets in the UK continue to perform well and the Bank has structured the scheme to ensure banks and building societies pay an appropriate price for the facility to minimise the risks for taxpayers," he added.
