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| Bank details £50bn lending boost | Bank details £50bn lending boost |
| (20 minutes later) | |
| The Bank of England has announced details of a plan to help prevent the credit crisis causing more damage to the UK banking system and economy. | The Bank of England has announced details of a plan to help prevent the credit crisis causing more damage to the UK banking system and economy. |
| Banks will be able to swap potentially risky mortgage debts for £50bn of secure government bonds to enable them to operate during the credit squeeze. | Banks will be able to swap potentially risky mortgage debts for £50bn of secure government bonds to enable them to operate during the credit squeeze. |
| The Bank's governor, Mervyn King, said the scheme aimed to improve liquidity in the banking system. | The Bank's governor, Mervyn King, said the scheme aimed to improve liquidity in the banking system. |
| It should also increase confidence in financial markets, he added. | It should also increase confidence in financial markets, he added. |
| Under the scheme, banks will be allowed to swap their "high quality" mortgage debts for government securities. | Under the scheme, banks will be allowed to swap their "high quality" mortgage debts for government securities. |
| This is a banking-market bail out of an ambition we haven't seen in this country since the early 1970's and possibly longer than that Robert Peston, BBC business editor class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/04/banks_big_bailout.html">Read Robert's blog in full | |
| The swap will be for a period of one year and may be renewed for a total of three years. | The swap will be for a period of one year and may be renewed for a total of three years. |
| It will only apply to mortgage debts on banks' books at the end of 2007 and the swaps cannot be used to finance new lending. | It will only apply to mortgage debts on banks' books at the end of 2007 and the swaps cannot be used to finance new lending. |
| Banks pleased | Banks pleased |
| Banks welcomed the central bank's "innovative and unique policy response" and said they were confident the move would go some way to free up credit markets. | Banks welcomed the central bank's "innovative and unique policy response" and said they were confident the move would go some way to free up credit markets. |
| "The banks are participating in this arrangement and expect it to make a significant contribution to alleviating the pressures in the UK money markets," the British Bankers' Association said. | "The banks are participating in this arrangement and expect it to make a significant contribution to alleviating the pressures in the UK money markets," the British Bankers' Association said. |
| British banks have become increasingly unwilling to lend to one another as a result of the credit crisis, which was triggered by massive losses for banks involved in the US sub-prime mortgage market. | British banks have become increasingly unwilling to lend to one another as a result of the credit crisis, which was triggered by massive losses for banks involved in the US sub-prime mortgage market. |
| Many investors, concerned at what happened to sub-prime mortgages in the US, no longer want UK mortgage-based assets. | Many investors, concerned at what happened to sub-prime mortgages in the US, no longer want UK mortgage-based assets. |
| The disappearance of this market has deprived banks of tens of billions of pounds of finance for mortgage lending. | The disappearance of this market has deprived banks of tens of billions of pounds of finance for mortgage lending. |
| The move should free up bank balance sheets and enable them to lend more to consumers and home buyers. | The move should free up bank balance sheets and enable them to lend more to consumers and home buyers. |
| U-turn? | U-turn? |
| However, the BBC's business editor Robert Peston said the move could be seen as a major U-turn by the Bank. | However, the BBC's business editor Robert Peston said the move could be seen as a major U-turn by the Bank. |
| Until now, the Bank of England has been more conservative in its financial support for banks than the Federal Reserve in the US and the European Central Bank. | Until now, the Bank of England has been more conservative in its financial support for banks than the Federal Reserve in the US and the European Central Bank. |
| In the US, the Federal Reserve took similar action with a $200bn programme to boost liquidity in financial markets last month. | In the US, the Federal Reserve took similar action with a $200bn programme to boost liquidity in financial markets last month. |
| Vince Cable, the Liberal Democrats' Treasury spokesman, had warned that the move could effectively nationalise the banks' losses. | Vince Cable, the Liberal Democrats' Treasury spokesman, had warned that the move could effectively nationalise the banks' losses. |
| But Mr King said the plan ensured that the risk of losses on the loans remained with the banks. | But Mr King said the plan ensured that the risk of losses on the loans remained with the banks. |
| Chancellor Alistair Darling said on Sunday the plan was needed to stop the UK's financial crisis worsening. | Chancellor Alistair Darling said on Sunday the plan was needed to stop the UK's financial crisis worsening. |
| Mr Darling will give details of the plan to MPs in the House of Commons later. | Mr Darling will give details of the plan to MPs in the House of Commons later. |