By Stephanie Flanders
Economics editor, BBC News
The Bank of England is poised to launch a new lending programme for UK banks in an effort to break the logjam in the credit market, the BBC has learned.
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But it will be similar to moves in the US, will be backed by the Treasury and could be launched as soon as next week.
The scheme would temporarily allow banks to swap their mortgage-based assets for government bonds.
The hope is that banks will find it easier to borrow and lend to other banks using these bonds as security, which in turn would ease up lending to individual borrowers.
The government does not consider this a bail-out of the banks and I've been told the scheme will not go ahead unless it can be designed to protect the taxpayer from any loss.
One safeguard will come from exchanging the mortgage-backed assets at less than their market value.
Banks are likely to welcome the plan, though it would need to be on a larger scale than previous efforts if it is to make a significant difference.
(BBC)
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