Last week the Bank of England finally came to its senses, and cut interest rates by 0.25%. Given that the fear factor has now firmly taken hold of the banking sector, and has rattled consumer confidence, it is likely that the Bank of England will have to cut rates further if recession is to be avoided.
To add to the country's woes, Lloyds TSB has announced that it has taken a £201M hit as a result of its exposure to the credit crunch. Analysts had expected a "mere" £150M.
Lloyds TSB wrote down the fair value of its holdings of asset-backed securities by £89M, it also wrote down £22M of its £100 million investments in structured investment vehicles (SIVs) and taken a £90M pre-tax loss in its corporate markets business.
Lloyds TSB claims that it has enough liquidity facilities to borrow in the short-term lending markets.
Eric Daniels, the chief executive, said that the impact of the credit crunch had been more than offset by profits from selling non-core businesses and the continued health of its retail bank.
Other well known banks are rather more exposed that Lloyds, it will be revealing to see what they report in the coming months.