The Bank of England will be lobbied by high street banks today to extend the special liquidity scheme, put in place three months ago to help free up money markets which have been frozen by the credit crunch.
The banks are thought to be keen to ensure that the scheme, which allows billions of pounds to be pumped into the financial system, is fine-tuned as it is not becoming any easier for banks to borrow money on the financial markets. Many need access to funding either from the money markets or from the Bank of England's special scheme in order to offer mortgages to customers and loans to businesses.
The banks are thought to have drawn up a number of suggestions for discussion with the Bank at a routine meeting today. The scheme was rushed into place in April shortly after the near-collapse of US bank Bear Stearns. The rescue of Bear Stearns, orchestrated by the US Federal Reserve, raised fresh fears about the solvency of the banking system and caused financing among the banks to dry up following last summer's credit crunch.
The Guardian
