Bank of England: two new stimulus schemes launched
The Bank of England has unveiled details of two new schemes aimed at helping banks to increase their lending.
The Bank of England has announced two new stimulus schemes designed to get banks lending and the economy moving.
Speaking at last night’s Mansion House dinner, the bank’s Governor, Sir Mervyn King, outlined plans to provide banks with cheap credit.
Loans to boost lending
In an admission that the extensive quantitative easing programmes have not been successful, the Bank of England will now offer cheap loans to banks with one proviso – they must be used to increase the bank’s lending.
The biggest criticism of the quantitative easing programme had been that banks had used the cash generated to improve their balance sheet, rather than lend.
King said: “The Bank and the Treasury are working together on a ‘funding for lending’ scheme that would provide funding to banks for an extended period of several years, at rates below current market rates and linked to the performance of banks in sustaining or expanding their lending to the UK non-financial sector.”
The scheme will allow banks to effectively ‘swap’ certain assets they hold which they may not be able to shift – a mortgage book, for example – for money from the Bank of England. It’s understood this will lead to up to £80 billion in new loans.
Boosting liquidity
A second scheme will see the launch of the snappily-named Extended Collateral Term Repo Facility, which will be aimed at improving banks’ liquidity.
Banks will be offered six-month loans of at least £5 billion in monthly auctions.
More on the economy
European Commission: Taxpayers to avoid bailing out banks in future
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New stimulus schemes designed to get banks lending and the economy moving! Well perhaps if the BoE lends directly to industry instead of giving yet more of taxpayers money to the banks to lock away, we may start the economy moving. This would bring confidence not only to industry but also start growth in the markets. So, such a simplistic idea! Would it work? Banks wouldn't like it, they would start whinging throwing all sorts of threats (along with their rattles) out of their fortified doors! Can BoE bypass the banks legally? (Anyone)!????
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It seems the government has a great idea to improve the economy with this new money going into new house building. Who will buy them if affordable mortgages aren't available? Let everyone have [i] confidence [/i] and take out a mortgage and a new credit cards; personal debts will work won't it. We need more social housing to be built for rent, but it won't happen.
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The government had an agreement with the banks that the banks would lend more in return for got support. It was called Merlin if I recall correctly. That didn't work but it allowed the banks to bolster their balance sheets. So if the banks re-neged, what were the penalties supposed to be? If the penalties were inadequate, heads should roll for whoever devised the half-baked idea. Vince Cable may have championed it, but it's his advisers who will have concocted it & who should be held to account
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16 August 2012