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Tuesday 30th of March 2010
February 4, 2009    

Bank of England lent £185bn under SLS

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by Kay Murchie

The special liquidity scheme (SLS), which was set up to encourage banks and building societies to lend by allowing them to temporarily swap assets that were difficult to trade, has lent £185 billion since last April.

The scheme, set up by the Bank of England, was originally for six months only but it was extended to the end of this month amid the collapse of Lehman Brothers and the chaos that followed last September.

However, the terms of the scheme meant that only assets, such as mortgage-backed securities, held by the banks prior to 31 December 2007, could be used.

The Bank said that 32 banks and building societies took part in the scheme with the Bank receiving assets from the banks valued at £287 billion.

In order to boost lending further, more changes are expected as earlier this week the Centre for Economics and Business Research (CEBR) warned that unless the Government intervenes to boost mortgage lending, property prices could fall a further 25% this year.

This would mean a peak-to-trough fall of around 40% from their peak in late 2007.

Many experts believe the answer lies in the plan recommended by Sir James Crosby last November, whereby the Government provide guarantees for the mortgage-backed securities that can help generate funds for new lending.

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Tags: £185bn, , , , Sir James Crosby, SLS, special liquidity sche