Bank of England prepares plan to boost banking system

Monday, April 21, 2008 - "(PressReleasePoint)" --The Bank of England is reported to be preparing a new plan that would enable UK banks to swap risky mortgage debts for government bonds.

In a bid to boost struggling UK lending markets, the bank is planning to provide £50 billion worth of secure bonds to the banking industry to enable them to continue to lend money to customers.

The unprecedented move by the usually conservative Bank of England is also expected to be followed by further help for struggling banks if it is required in the future.

Details of the central bank plans will be announced today and economists predict that the scheme could be in place by the end of this week.

Loans provided to banks will have to be paid back, but the scheme will leave UK taxpayers exposed to potentially risky debt, while banks will keep any profits they make.

Chancellor Alistair Darling warned over the weekend that the current economic downturn looks set to continue, while the Royal Bank of Scotland announced last week that it is seeking cash from shareholders in order to improve its capital base.

Vince Cable, Liberal Democrat Treasury spokesman, wants lenders to provide the Bank of England with guarantees in return for help during the credit crunch.

Businesses are advised to invest in accounting software in order to track their finances more effectively during the current uncertain economic conditions.