Bank pumps billions into markets
Bank pumps billions into markets
Friday 26th September 2008
The Bank of England is pumping over £40 billion in the markets as the threat of a second credit crunch arises from the current global banking crisis.The Old Lady of Threadneedle Street – in a co-ordinated effort with the US Federal Reverse and the European Central Bank (ECB) – will offer £16 billion in one-week loans, £5.4 billion in overnight loans and £21.7 billion on three-month loans.
The overnight loans and one-week loans will be given out as dollars.
The action of the central banks is deemed necessary as banks themselves are stopping lending among each other or upping rates – as fears of further banking instability grows – with the flames of the banking bonfire bellowed further today by the collapse of US bank Washington Mutual.
A Bank of England statement read: "These operations are intended to address funding pressures.
"Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressures in funding markets."
The Bank of England also admitted it was willing to drain reserves in a bid to fund the auctions of cash.
Rising interbank lending rates have already started to hit the UK high street, with mortgage lenders upping rates and tightening lending criteria.
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