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Friday, July 11, 2008

Increase Liquidity Demand

Today some of the UK's largest banks are lobbying the Bank of England to extend the terms of its Special Liquidity Scheme (SLS), to increase liquidity in the money markets.

The Telegraph reports sources that say that the SLS has not restored confidence to financial markets, as banks continue to avoid lending to each other as well as to customers.

This fact can be attested to by anyone seeking a new mortgage or credit facility.

Finance directors of the banks, and heads of the banks' Treasury departments, will attend a meeting with representatives of the Bank of England. They are likely to press for the Bank to accept mortgages written this year as collateral.

As said many times before, this entire crisis can be defused if confidence is restored within the system. In order for this to happen the commercial banks need to start lending to each other, and the Bank of England needs to kick start that process by showing some proactive confidence boosting leadership.

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