Banks told to release reserves
THE Bank of England has asked Britain’s banks to start tapping into their huge cash reserves in a move designed to bolster the £140billion rescue package unveiled last week.
It is believed governor Mervyn King has told them they may release some of the money they were told to build
up over the past three years as part of plans to make them more resilient to crisis.
Such a move may free a further £150billion, most of which is currently held in easily sold assets such as government
debt, for banks to lend to households and businesses.
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In a little-noted part of his Mansion House speech, King said the Bank’s willingness to provide money to the
Such a move may free a further £150billion
financial system at cheap interest rates means “the need for banks to hold large liquid asset buffers is much
diminished”.
The move comes amid speculation the Bank is preparing to print another £50billion of cash to bring its quantitative easing programme to £375billion.
Analysts also think the Monetary Policy Committee may also seek to slash base rates from 0.5 per cent to a nominal 0.25 per cent.