LONDON (AFP) — The Bank of England is to pump an extra 50 billion pounds into the banking system as early as the end of next week, BBC television has said.
Without citing sources, the broadcaster said Friday that the Bank of England would issue one-year bonds over three years and swap them for securitised mortgage assets the banks cannot sell due to the squeeze on the global credit markets.
The idea is to encourage banks to lend to each other again and meet banks' demands for longer term loans as well as kick start a slowing housing market, it added. The loans would not be included on the national debt.
"It will be the biggest ever special initiative by the British monetary authorities to supply liquidity to the British banking system," the BBC's business editor Robert Peston wrote on the broadcaster's website.
Royal Bank of Scotland was said earlier Friday to be set to raise between five and 12 billion pounds in a share issue to improve its finances.
The Daily Telegraph claimed the cash boost was required because of the need to combat subprime-related writedowns and high costs caused by the record-breaking takeover of ABN Amro.
The Financial Times said a rights issue was one of a number of options being considered and that bosses had not yet reached a decision.
Neither newspaper gave a named source.
RBS itself made no comment other than to note the speculation and say that its interim management report on trading performance and capital would be delivered next week.
The BBC said the Bank of England's expected move could see more high street banks such as Barclays ask shareholders for extra cash.
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