Addition liquidity for banks through injection of cash
An injection of cash from the Bank of England has recently increased liquidity for the banking industry, which means that banks and lenders may be able to continue with their loan and mortgage lending without struggling, at least for the short term. Since the global credit crunch came into effect many lenders have found that it has become difficult and extremely expensive to secured funding for their lending on the wholesale money markets, and this has resulted in many lenders having to raise their interest rates and cut back on their lending.
Over recent months officials from agencies such as the British Banker’s Association and the Council of Mortgage Lenders have been calling for assistance from the Bank of England in order to increase funding and liquidity within the banking industry, and recently senior officials from major UK banks arranged a meeting with the governor of the Bank of England in order to discuss how to best address this problem.
However, before the meeting even took place Mervyn King, the governor of the central bank, decided to inject a further £5 billion into the banking industry, on top of the £6 billion that had already been pledged to the money markets previously, making a grand total of £11 billion.
Over recent months consumers have found it increasingly difficult to get affordable finance, such as loans and mortgages, due to decreased accessibility from struggling banks, and it is hoped that this cash injection will help to ease the situation in the short term whilst the nation rides out the effects of the global credit crunch.
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