Cash injection for the banking industry
March 26, 2008
The Bank of England has announced that it will be providing a surprise cash injection to the banking industry in order to try and relieve the problems that the industry is experiencing when it comes to liquidity. Industry officials have been calling for more cash from the Bank of England for some time in order to try and increase liquidity, and the central bank has now released an additional £5 billion into the banking sector in addition to a further £6 billion that had already been pledged by the Bank of England.
The Council of Mortgage Lenders and the British Banker’s Association have both expressed concern over the problems that are facing the banking industry. Many lenders have had to reduce their lending levels and increase interest rates as a result of difficulties in getting finance on the wholesale money markets, which has become increasingly expensive and difficult since the credit crunch took a hold last summer.
Senior banking officials recently arranged a meeting with the governor of the Bank of England, Mervyn King, in order to discuss how the central bank could help the banking industry with an additional cash injection. Mr King then announced that he would be providing the additional cash before the meeting took place.
King offered the additional money to the banking industry just one day after there were widespread rumours that HBOS was on the verge of collapse – a rumour that was allegedly started by unscrupulous stock brokers that wanted to make money from the stock market, and which both HBOS and the Bank of England have reiterated are completely untrue.
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