Bank of England Eligible Collateral Widens

Bank of England Eligible Collateral Widens

Bank of England governor Mervyn King, has extended the collateral that can be used as security for its short-term loans to include mortgage-backed securities.  He also pledged to increase funding for the short-term auctions he announced in December in a bid to restore confident in the money markets.

In a speech at the Treasury, he said “I assure you that the Bank of England will provide the liquidity assistance that the system needs to restore confidence.  Such help can only be a temporary measure, but it will be a useful bridge to a longer term solution”.

Our view

This will make available much more funds for hard pressed lenders.  We have seen figures offered by Government in the order of £50bn from government alone.  We are also now seeing new money market investment funds being made available to potential investors to take advantage of the lower risk investment opportunity of lending money to banks and building societies.

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