International Law

Bank of England Special Liquidity Scheme

Although there are newspaper reports (The Australian) of the Reserve Bank of Australia buying mortgages to provide market liquidity it has not published details apart from Glenn Steven's recent speech.

In England, the Bank of England has announced a scheme to allow banks to swap temporarily their high quality (but illiquid) mortgage-backed and other securities for UK Treasury Bills.

The Special LIquidity Scheme acknowledges that:
"Financial markets are not working normally, which if left unchecked will have an impact on the wider economy. Across the world, there is a lack of confidence in assets created from packages of bank loans, most notably mortgage-backed securities. That lack of confidence was prompted by the downturn in the United States housing market and, in particular, the problems associated with sub-prime mortgages there. The markets that normally trade these assets have, in effect, closed, so it has become very difficult for banks to exchange these assets for cash ? the assets are currently ?illiquid?."

Further details

Full post as published by Australian Regulatory Compliance Review on April 22, 2008 (boomark / email).