Business

King hits panic button

London’s iconic black cabs remain the best in the world.
London’s iconic black cabs remain the best in the world. Contributed

THE Governor of the Bank of England and the Chancellor of the Exchequer last night announced measures designed to prevent a new credit crunch that would push Britain's economy deeper into recession.

The move was a clear sign that the Governor and the Treasury are alarmed by the prospects for the economy in the face of potential financial shocks from the eurozone.

Speaking at the annual Mansion House dinner in the City of London, the Governor, Sir Mervyn King, and George Osborne said the Bank and the Treasury were working on a liquidity operation - a "funding for lending" scheme - which would provide private banks with cheap funding in exchange for a commitment from lenders to provide cheap loans to ordinary businesses and households.

Sir Mervyn said he expected the scheme to be up and running "within a few weeks".

Last night, the Treasury said it hoped the measures would increase annual lending flows to the economy by about 5 per cent, or AU$124.27 billion.

The scheme would permit private British banks to pledge their existing, illiquid loans as collateral at the Bank of England in exchange for highly liquid UK government bonds, which they could then sell on. In return for this cheap financing, banks would be required to commit to using the proceeds to increase the volume of loans to businesses and households, and to make that lending cheaper than it otherwise would have been.

Sir Mervyn said the eurozone crisis had created a 'black cloud' over the financial sector and instilled 'extreme uncertainty', which was pushing up banks' funding costs and crushing lending to the real economy.

The operation would be similar to the AU$310.67 billion Special Liquidity Scheme, established in April 2008 during the financial crisis, in which the Bank of England (BofE) allowed lenders to swap mortgage-backed securities for UK sovereign bonds in order to ease the flow of lending to households.

The SLS was wound down this year, but the International Monetary Fund advised the BofE last month to re-establish something similar in order to boost the economy.

Sir Mervyn and Mr Osborne said another scheme intended to ease funding pressures on banks - the Extended Collateral Term Repo Facility - would activate shortly.

Sir Mervyn said the BofE would start auctioning six-month sterling loans to help UK banks to weather any shocks emanating from Europe.

The Chancellor said the new measures showed the Government and the BofE were not standing idly by waiting for the eurozone crisis to hit Britain.

"We are not powerless in the face of the eurozone debt storm," he told financiers and dignitaries at the Mansion House.

"Together we can deploy new firepower to defend our economy from the crisis on our doorstep. We are rolling up our sleeves and doing everything possible to protect British families and firms."

Mr Osborne confirmed that the new Financial Policy Committee - the 'super-regulator' based at the BofE - would be given a mandate to support growth as well as ensuring financial stability.

Some City figures have complained that new capital requirements being imposed on banks by the Government and regulators are choking off lending to the real economy.

The Chancellor said he supported a eurozone banking union as a means of calming financial markets over the future of the single currency, but reiterated his pledge that Britain would not allow the UK to be bound by it.

Topics:  contagion economy eurozone



Date nights under $50

ACCORDING to The Bachelor falling in love involves helicopter rides, private jets, shopping trips, and we mustn’t forget the hot tubs.

Brisbane's arts and culture events centre stage

You loved the film, now you're about to love the musical. Don't miss The Bodyguard The Musical in Brisbane this July.

THE arts and culture events you don't want to miss.

Homewares stores to fulfil your Instagram dreams

No Caption

You too can become an Insta-star with these fab stores.

Top 10 Brisbane experiences to cross off your bucket list

Do yourself a favour and get amongst the food truck scene. Eat Street is a great place to start.

A GOOD bucket list doesn’t have to span continents or cost millions.

Six mega sporting events you need to be at this year

Don't miss all the action trackside this season.

IF THERE is one thing Brisbane does damn well, it’s play host.

Six reasons to get to Brisbane this Autumn

The Brisbane Powerhouse has free comedy on Friday nights.

AUTUMN has to be up there with one of the best seasons of the year.

The best things to do in Brisbane are FREE. Yes, FREE

Mt Coot-tha is a seriously gorgeous way to start your day.

HEADING to the big smoke doesn’t have to come with a big price tag.

Leave 'emotion' out of McCulkin murder verdict

Barbara McCulkin and her daughters Vicki and Leanne. The family disappeared in January of 1974.

Jury to consider whether Vincent O'Dempsey is guilty or innocent

Doctor's pregnancy comments cause outrage

FREE HEALTH: South-west health directer doctor Chris Buck.

A DARLING Downs doctor has come under fire for a Facebook post

Warwick company vehicle stolen in brazen theft

Generic police sign  Photo Contributed

A distinctive vehicle has been stolen from a Warwick address.

Local Partners

Concert death toll revised up to 22, tour suspended

TWENTY-TWO people have been killed and at least 59 people have been injured following a terror attack in Manchester

Casual Keanu says fame is ‘cool’

Keanu Reeves in a scene from the movie John Wick: Chapter 2.

NOBODY expected much of John Wick when it was released in 2014.

Ariana Grande breaks her silence after fatal blast

According to reports quoting witnesses, a mass emergency evacuation was prompted after explosions were heard at the end of US singer Ariana Grande's concert in the arena.

The entertainment industry is in shock after attack on concert

Pitch Perfect star suing Woman’s Day over ‘liar’ articles

Actor Rebel Wilson outside court on Friday.

REBEL Wilson's career destroyed by grubby campaign, court hears.

Seven Year Switch: The boner to end all boners

Johnny’s outraged over claims he has a cracked boner.

She gulps. Her face says it all.

Bay to star in Hollywood shark thriller ‘Cage Dive’

Cage Dive, written and directed by Gerald Rascionato, is now screening in the United States of America. It had scenes filmed in Hervey Bay.

And our visiting humpback whales also make appearance.

Celebrity sex tapes: Where does all that money go?

Basically, did Paris and Kim earn fortunes from their videos?

One of Maryborough's most historic homes is still for sale

FULL OF HISTORY: Trisha Moulds is owner of the historic Tinana state known as Rosehill. The beautiful home is currently for sale.

It has been the scene of both joy and tragedies over the years.

The face of the Sunshine Coast's overpriced rental crisis

Alyx Wilson had to rent a $385 unit in Currimundi because the market was too competitive for cheaper rental housing. She is now renting a room from friends who own a house in Currimundi, and says its much more affordable.

Young people feel the strain in competitive, expensive rental market

WATCH: Take a tour of a tradie's dream home

5a Bruce Hiskens Court, Norman Gardens, going for $720,000. INSET: Lea Taylor.

Huge block with potential for anything

Deputy Premier makes massive call on controversial sand mine

Aerial view of the proposed Forest Glen sand mine.

BREAKING: State Government makes huge call on Coast sand mine plans

Ready to SELL your property?

Post Your Ad Here!