BoE injects £22bn into money markets

by Gill Montia

Story link: BoE injects £22bn into money markets

The Bank of England (BoE) has announced that it will be pumping £22.3 ($40 billion) into the money markets today.

The move comes alongside similar actions to improve liquidity in global financial markets by the European Central Bank, the US Federal Reserve, Bank of Canada, Bank of Japan and the Swiss National Bank.

The BoE’s £22.3 billion is in addition to £25 billion already provided this week, as international markets rode out the trauma of the collapse of Lehman Brothers and the last minute rescue of insurance giant AIG.

In addition, the Bank’s Special Liquidity Scheme, which was introduced in April to ease funding constraints on UK mortgage lenders, has been extended for three months, until the end of January.

The latest injection of cash is likely to be rapidly oversubscribed as banks have once again become extremely nervous of lending to one another in the wholesale markets.

Unless the situation is eased financial institutions that need to refinance their debt could face a similar fate to Northern Rock.