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| Version 1 | Version 2 |
|---|---|
| Bank moves to ease credit jitters | Bank moves to ease credit jitters |
| (about 1 hour later) | |
| The Bank of England (BoE) has acted to ease the continuing credit crunch hitting financial markets. | The Bank of England (BoE) has acted to ease the continuing credit crunch hitting financial markets. |
| It has increased the amount of cash banks can deposit with it and then use when they need overnight funding. | It has increased the amount of cash banks can deposit with it and then use when they need overnight funding. |
| The move could ease the rates banks are charging each other for short-term loans, which have soared on worries about risky investments. | The move could ease the rates banks are charging each other for short-term loans, which have soared on worries about risky investments. |
| However these Libor rates remained high despite the intervention, the British Banking Association said. | |
| The Bank's action comes a day it sets the UK's base interest rate, which is forecast to stay at 5.75%. | |
| US-centred turbulence | US-centred turbulence |
| The Bank of England's move means that when banks need additional funds they will be able to draw on the extra money they are now effectively saving with the Bank of England. | The Bank of England's move means that when banks need additional funds they will be able to draw on the extra money they are now effectively saving with the Bank of England. |
| In crude terms, the Bank is basically providing additional cheap finance to the banks Robert PestonBBC Business Editor Read Robert's blog | In crude terms, the Bank is basically providing additional cheap finance to the banks Robert PestonBBC Business Editor Read Robert's blog |
| This could make them less reliant upon having to borrow extra funds from other commercial lenders on the so-called overnight borrowing markets, where the interest rates charged have recently been substantially above the Bank of England's current 5.75% base rate. | This could make them less reliant upon having to borrow extra funds from other commercial lenders on the so-called overnight borrowing markets, where the interest rates charged have recently been substantially above the Bank of England's current 5.75% base rate. |
| The Bank of England has increased the amount of funds banks can deposit with it by 6% to £17.6bn, and said it was prepared to increase this by a further 25% if needed. | The Bank of England has increased the amount of funds banks can deposit with it by 6% to £17.6bn, and said it was prepared to increase this by a further 25% if needed. |
| The Bank provides the reserves to the banks via loans to them - backed by gilts and other collateral. | The Bank provides the reserves to the banks via loans to them - backed by gilts and other collateral. |
| BBC Business Editor Robert Peson said that this meant the announcement was "big news". | BBC Business Editor Robert Peson said that this meant the announcement was "big news". |
| "In crude terms, the Bank is basically providing additional cheap finance to the banks to meet any short term requirements they might face," he said. | "In crude terms, the Bank is basically providing additional cheap finance to the banks to meet any short term requirements they might face," he said. |
| "An increase in the reserve requirement is in affect an increase in lending to banks at the base lending rate of 5.75%. | "An increase in the reserve requirement is in affect an increase in lending to banks at the base lending rate of 5.75%. |
| "It represents a significant increase in the liquidity of the banking system ¿ and relieves pressure on the banks to borrow at the higher penalty rate of 6.75%." | "It represents a significant increase in the liquidity of the banking system ¿ and relieves pressure on the banks to borrow at the higher penalty rate of 6.75%." |
| The global credit squeeze was sparked by record levels of defaults in the US sub-prime mortgage market. | The global credit squeeze was sparked by record levels of defaults in the US sub-prime mortgage market. |
| This has spread to the wider global loans market as banks become far more cautious about whom they lend to. | This has spread to the wider global loans market as banks become far more cautious about whom they lend to. |
| With banks less willing to lend money, they have been charging higher interest rates, leading to a reduction in affordable credit. | With banks less willing to lend money, they have been charging higher interest rates, leading to a reduction in affordable credit. |