BOE places Emergency Funds bank on the table

Following the widely publicized meeting between the Bank of England Governor Mervyn King and executives from the banking industry the offer of emergency short-term funds to banks is back on the table in order to encourage inter bank lending.

Having sold an extra 5 billion pounds in order ti curb borrowing costs and the operation will remain open until the end of April due to the three month period where the cost of borrowing between banks, rose for a 10th consecutive day .

Following the meeting HBOS Plc the UK’s biggest mortgage lender said that the bank had no liquidity problems despite trading as its lowest ever price.

Moyeen Islam , a fixed-income strategist at Barclays Capital said that: “the meeting with the governor and senior members of the financial community today is important for the bank to get an understanding of the stresses they’re facing” due to the fragile conditions of the sterling money market.

The central bank received nearly three times its budget value in bids, and allocated 10.9 billion pounds with was around 36 percent of bids received.

Angela Knight, the chief executive of the British Bankers’ Association, said in an interview on BBC Radio 4 today that “we’re all facing as I say a particularly unusual situation in this credit crunch”| and thankfully “the Bank of England is very keen to ensure that we have good strong confidence in our market - after all we’ve got good strong banks.”

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