Government Plan to Help Lenders Fight Credit Crunch

Government Plan to Help Lenders Fight Credit Crunch



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The Government has vowed to increase liquidity in markets, which has sent bank’s shares escalating, with Barclays adding 3.2% and the Royal Bank of Scotland adding 1.6 %.

Gordon Brown reassured bank bosses that they would implement measures to stop the lending drought that is shaking the economy.

Numerous options are being discussed but a possibility is asset swapping where lenders could offer prime mortgages to the BoE in exchange for government securities that could then be traded for money.

It is hoped that new measures will increase the confidence in banks lending to each other, as faith in mortgage backed assets has disappeared due to their effects on the U.S housing market.
 

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