Bank of England giving more money into system

xarjia

hey.

Just read the bank of england is giving £11.35 billion into the UK system to relieve the credit squeeze.

that's good news???

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3067019.ece

Arcaine

For us simple consumers, it will make little to no difference.
However these loans will do little to solve the banks problems. Banks will still not want to lend to each other as;
a) they want to keep the cash for themselves to cover any losses they are making because of exposure to bad debt due to the sub-prime problem and
b) they have no idea what the other banks are holding in bad debts and so do not want to lend to them.
As both of these conditions are not going to go away overnight (in fact there is a possibility the sub-prime losses could be a lot larger next year) then this is only a temporary reprieve.