Wednesday, 11 June 2008

Bank of England strikes secret deal with large banks

The idea is simple; the bank of england looks after the big banks, and the big banks look after the little ones. The FT advisor website are claiming that the BoE struck a secret deal with top banks to rescue ailing competitors in return for the £50bn special liquidity scheme. If the FT are printing it, it must be true:

Jason Kabel, associate director and portfolio manager, money market and fixed income for F&C Investments, said the country’s biggest lenders were being granted access to the Bank’s special liquidity fund in return for the trickling down to smaller retail banks through transactions and not being horded bolster up balances.

Mr Kabel said: “The larger lenders all charged in first, however, it is a jittery market and they were reluctant to pass on money in transactions as, at the moment, you just have no idea who is going to have problems next. It has not solved the trust issue.

“The result is the cash injection was limited in impact with only a handful of banks actually managing to lower rates. Nearly all have since gone up as it provided a floor but liquidity still remains at zero.”

A spokesman for the Bank of England said it would not comment on what organisations had called on the funds before 21 October when the drawdown facility closed but said the £50bn should trickle down throughout transactions in the banking system.

5 comments:

CWS said...

The banking system must be more crocked than we thought. Secret deals with banks, whatever next?

Rick said...

No doubt it simply freed up money in the system to be invested in commodities - hence the high oil and food prices!

CWS said...

private-public partnership - nu labour all the way.

London estate agent said...

sounds like a sensible idea to me.

aSteve said...

That's an odd article in the FTadvisor...

The first thing that strikes me as strange is that the £50bn SLS scheme attracted demand for almost double that amount - and, as I understand it, this was acceptable to the BoE - so, I wonder why this article goes on about the £50bn figure which seems to be clearly out-of-date?

I also think it is odd that the commentator attributed to these revelations is from a relatively small (£746m) asset management company.

Either this article is releasing a lot of news by stealth, or it is below-par for the FT.