BoE lends a hand with liquidity

The Bank of England today set up permanent schemes for offering liquidity to commercial banks, replacing the Special Liquidity System it launched in April to cope with the credit crunch.

Banks will from Monday be able to borrow gilts or cash from the Bank against a variety of collateral for 30 days in a new Discount Facility Window. The interest rate will increase according to how much banks want to borrow and how risky their collateral is.

"These arrangements set out our liquidity provisions in a systematic way to help banks plan their access to central bank liquidity, and so add certainty," Governor Mervyn King said.

The bank will also reduce how frequently it reveals use of overnight borrowing facilities following scare stories.

Three-month sterling Libor today fell for the third day running, from 6.12% to 6.1825%.