Bank of England Offers Banks Emergency Funds.

The Bank of England has followed the U.S. Federal Reserve in offering extra funds as a short-term emergency operation to banks in order to avert a financial-market meltdown by increasing the availability and security of cash.

The Bank of England has offered 5 billion pounds of three-day reserves in what they have described as an “exceptional fine-tuning operation.”

Following this release the BOE has received bids worth 23.6 billion pounds and sanctioned a total of 21.19 percent.

Following the BOE announcement today the pound fell as much as 0.8 percent against the dollar trading at $2.0038.

A statement released today by the UK central bank indicated that the action has been taken as a “response to conditions in the short-term money markets this morning, to ensure that the overnight rate is close to bank rate” and will continue to monitor the market closely in order to anticipate any further necessary action.

The Federal Reserve reduced its discount rate yesterday, which is the first weekend action in over thirty years. Following the conclusion of the Bear Stearns sale to JP Morgan chase the dollar to record lows against the Yen and the euro sending equity markets into further turmoil.

Richard McGuire, Royal Bank of Canada in London believes that “the risks to the downside are mounting. While the rest of the world is clearly implicated it’s still primarily a U.S. problem although the U.K. is under threat.”

As a result of the Bank of England’s action, commercial banks have been able to reach 25 percent of their reserve targets, with the average target around the 30 percent mark.

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