UK banks to benefit from $7.8bn monthly funding

20 June 2012

Banks in the UK are set to benefit from a new tranche of funding from the Bank of England (BoE) to be implemented throughout the remainder of 2012.

The central institution has announced today (20 June) that its collateral term repo operation (ECTR) will be extended for the final six months of the year in order to provide the country's ailing financiers with some much-needed additional liquidity.

Under the terms of the ECTR, banks are permitted to use funds from the BoE in return for lower-quality collateral - through areas such as mortgage-backed securities, personal loans and credit card debt - than in normal circumstances.

The BoE has committed a minimum of £5 billion ($7.8 billion) every month to this initiative and indicated it forms part of its plan to stimulate growth in the UK's struggling economy.

BoE governor Mervyn King unveiled the ECTR last December and said the programme was initially intended to provide support on a month-to-month basis rather than over a longer period.

By Claire Archer

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