BOE $200 Billion Swap Extends Term & Loosens Criteria
The Bank of England offered $200 Billion in government bonds for mortgage securities from banks.
The move allows long term swaps and rather than only AAA securities, mirrors the Fed's TSFL lending scheme, which will accept any type of collateral.
Financial institutions will retain responsibility for losses from the assets they loan to the Bank of England.
The swaps will be for a period of one year, renewable for up to three years. Only assets existing at the end of 2007 can be used in the swap.
Chancellor of the UK Exchequer Alistair Darling said today in an interview with Sky News.
"This is the right thing to do to stabilize the situation. At the moment there is little or no market for assets backed by mortgages."
The bank said the public is exposed to a loss only if a lender participating in the program defaults
and the assets they have placed with the central bank are insufficient to cover the value of the Treasury bills in the swap.
That's why the bank is asking for collateral of greater value than the bills it lends.
Hattip to Bloomberg
The move allows long term swaps and rather than only AAA securities, mirrors the Fed's TSFL lending scheme, which will accept any type of collateral.
Financial institutions will retain responsibility for losses from the assets they loan to the Bank of England.
The swaps will be for a period of one year, renewable for up to three years. Only assets existing at the end of 2007 can be used in the swap.
Chancellor of the UK Exchequer Alistair Darling said today in an interview with Sky News.
"This is the right thing to do to stabilize the situation. At the moment there is little or no market for assets backed by mortgages."
The bank said the public is exposed to a loss only if a lender participating in the program defaults
and the assets they have placed with the central bank are insufficient to cover the value of the Treasury bills in the swap.
That's why the bank is asking for collateral of greater value than the bills it lends.
Hattip to Bloomberg
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