BoE

123jump.com Staff
21 Apr, 2008
New York City

The Bank of England unveiled a plan to exchange

[R]1:00PM New York, 5:00PM London – The Bank of England unveils £50 billion debt plan to improve liquidity in the financial system.

London stock indexes fell on speculation that the £50 billion debt plan unveiled by the Bank of England will not be enough to ease credit conditions on the market.

In London trading FTSE 100 stocks fell 0.06% or 3.5 to 6,053.00.

Of the FTSE 100 index stocks 31 gained, 70 declined and 1 was unchanged. ITV led advancers in the index shares with a rise of 6.09%, followed by Admiral Group increasing 4.48%.

Bank of England launches £50 billion debt plan

The Bank of England reported on its Web site today that the central bank is launching a scheme to allow banks to swap temporarily their high quality mortgage-backed and other securities for U.K. Treasury Bills.

Under the scheme, which is meant to lift the ‘overhang’ on most financial institution’s balance sheets, banks will be allowed to swap illiquid assets of sufficiently high quality for Treasury Bills.

Banks will be able to swap for those bills a range of high-quality assets, including AAA-rated securities backed by UK and European residential mortgages.

However, to prevent banks relying on the scheme to finance new lending, they will be able to swap securities formed only from loans that were already on their balance sheets at the end of 2007.

According to the Bank of England, each swap will be for a period of 1 year and may be renewed for a total of up to 3 years, while the risk of losses on their loans remains with the banks.

Swaps are also available only for assets existing at the end of 2007 and cannot be used to finance new lending.

In addition, during the lifetime of an asset swap, banks will be required to pay a fee based on the 3-month London interbank interest rate or Libor.

Private economists estimate the initial facility to be app £50 billion. Authorities also say the facility will be independent of the regular money market operations by the central bank.

Commented Governor of the Bank of England, “The Bank of England’s Special Liquidity Scheme is designed to improve the liquidity position of the banking system and raise confidence in financial markets while ensuring that the risk of losses on the loans they have made remains with the banks.”

Average asking priced drop 0.1% in April

Rightmove Plc reported today in its House Price Index that the average house asking price fell by 0.1% from £239,655 in March to £239,521 in April, while prices eased to 1.3% in April from 5% in March.

Average unsold stock per estate agency branch has also risen from 67 to 70.

Gainers & Losers

ITV Plc led advancers in the FTSE 100 index shares with a rise of 6.09% followed by rises in Admiral Group of 4.48%, in BHP Billiton Plc of 3.02%, in Antofagasta Plc of 2.95%, and Lonmin Plc of 2.83%.

Commodity stocks advanced on growing doubts over the outlook for short and long-term supply growth from OPEC led crude oil prices above $117 per barrel. British Energy rose 2.35%, Vedanta Resources gained 2.30%, Rio Tinto Plc spiked 1.91% and Anglo America increased 1.66%.

Hammerson Plc led decliners in the FTSE 100 index shares with a drop of 5.03% followed by losses in British Airways Plc of 4.02%, in Barclays Plc of 3.53%, in British Land Co. of 3.50%, and HBOS Plc of 3.23%.

Homebuilders slumped after a report showed that house prices fell by 0.1% from March in April.

Home Retail Group slipped 2.47% and Lloyds TSB Group fell 2.37% as a result.