Its those credit rating agencies again; with their recent downgrades of UK buildings socieites, they have thrown a spanner into the Bank of England's Special Liquidity Scheme. From today's Times:
THE Bank of England is locked in talks with seven British building societies to renegotiate crisis funding measures introduced at the height of the credit crunch. A slew of credit-rating downgrades for building societies last week threatens to breach the terms of the government’s Special Liquidity Scheme and force the societies to hand back cash to the Bank of England.
Such a move would reduce the amount of new lending they could make, dealing a blow to Whitehall plans to kick-start the housing market. Chelsea, Yorkshire, Skipton, Coventry, Newcastle, Norwich & Peterborough and Principality are the societies affected. All have recently passed stress tests imposed by the Financial Services Authority (FSA) and are not considered in danger of collapse. Nonetheless, they will now be charged more to use the emergency funding.