News: Darling plans to extend new liquidity scheme

Fri, 15 Aug 08

Alistair Darling is planning to extend the Bank of England's special liquidity scheme, which allows banks to swap certain assets temporarily

The scheme, brought in by the Bank of England, allows banks to temporarily swap their high quality mortgage-backed and other securities for UK Treasury Bills.

Under the scheme, banks can, for a period, swap illiquid assets of sufficiently high quality for Treasury Bills. Responsibility for losses on their loans stays with the banks.

The scheme's aim is to improve the liquidity position of the banking system and increase confidence in financial markets.

Mr Darling is apparently looking to allow the issue of mortgage backed securities issued after the current cut-off date of December 2007.

He is also rumoured to be looking at bringing in mortgage backed securities issued by the government itself, which is expected to face opposition from the Bank of England.

Last week Mr Darling told the BBC that he was looking at ways the Government could intervene to help the market, which has led to widespread speculation that stamp duty may be relaxed, or be given a ‘holiday.'

Meanwhile, the Chief Executive of the National Association of Estate Agents(NAEA) Peter Bolton King, urged the Government to end uncertainity on whether or not stamp duty would be stopped, even just temporarily, in order to avoid delaying transactions in the hope that money may be saved in the coming months.

He said it was crucial to do this quickly as new data from the NAEA and Royal Institution of Chartered Surveyors (RICS) figures this week have revealed positive signs that the market is leveling out.

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