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Government plans to help UK banks Government plans to help UK banks
(40 minutes later)
The Bank of England is poised to launch a new lending programme for UK banks in an effort to break the logjam in the credit market, the BBC has learned.The Bank of England is poised to launch a new lending programme for UK banks in an effort to break the logjam in the credit market, the BBC has learned.
Final details are still being worked out including the scale of the plan and the exact terms.Final details are still being worked out including the scale of the plan and the exact terms.
But it will be similar to moves in the US, will be backed by the Treasury and could be launched as soon as next week.But it will be similar to moves in the US, will be backed by the Treasury and could be launched as soon as next week.
The scheme would temporarily allow banks to swap their mortgage-based assets for government bonds.The scheme would temporarily allow banks to swap their mortgage-based assets for government bonds.
The hope is that banks will find it easier to borrow and lend to other banks using these bonds as security, which in turn would ease up lending to individual borrowers.The hope is that banks will find it easier to borrow and lend to other banks using these bonds as security, which in turn would ease up lending to individual borrowers.
The government does not consider this a bail-out of the banks and I've been told the scheme will not go ahead unless it can be designed to protect the taxpayer from any loss.The government does not consider this a bail-out of the banks and I've been told the scheme will not go ahead unless it can be designed to protect the taxpayer from any loss.
One safeguard will come from exchanging the mortgage-backed assets at less than their market value.One safeguard will come from exchanging the mortgage-backed assets at less than their market value.
Banks are likely to welcome the plan, though it would need to be on a larger scale than previous efforts if it is to make a significant difference.Banks are likely to welcome the plan, though it would need to be on a larger scale than previous efforts if it is to make a significant difference.
Taxpayer risk
Vince Cable, deputy leader of the Liberal Democrats, acknowledged the need for action but said the taxpayer should not take on the risks and losses of the banks.
"We need to see the small print of what's being proposed," he said.
He warned that taxpayers must be protected from any losses.
The banks' mortgage-based assets are being exchanged for safer government debt, therefore the government is taking the banks' risks onto its balance sheet, he said.