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oldsport

Sls And The National Debt

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I think CGT, HIPs and LTV restrictions will turn out to be distractions from the underlying issue for HPC which remains the availability of mortgage finance.

Central to this is going to be whether the £250bn of SLS is renewed.

I'd always thought it was a no brainer that it would be extended. But there was a post a while back saying that it wasn't that simple because even though the governement would like to extend it, after a while it would have to become part of the national debt and that would spell disaster for our ability to borrow.

I'm just wondering if anyone knows if there's an actual rule (UK, EU or otherwise) about when it would need to become part of the national debt?

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http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/7205865/Mortgage-rates-to-rise-as-Mervyn-King-rules-out-liquidity-scheme-extension.html

Published: 3:11PM GMT 10 Feb 2010

During the Bank of England's Inflation Report briefing, Mervyn King confirmed that the Special Liquidity Scheme which has helped lenders fund mortgages during the crisis would end in January 2011 as scheduled.

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After a bit more googling, it seems that ages ago the BoE set up a permanent replacement scheme for SLS called the "Discount Window Facility" where illiquid assets can be swapped for gilts for up to a year at a time.

So whilst it may be technically correct for Merv to say that the SLS isn't being extended, presumably the banks will all just swap over to this scheme instead

Originally it was for 30 days as quoted below and more recenlty it's been extended to 364 days

this article from October 2008 covers it http://uk.reuters.com/article/idUKTRE49E8FU20081016

October 2008

(Reuters) - The Bank of England will launch on Monday a permanent successor to its Special Liquidity Scheme introduced to ease the credit crunch, in a major reform of the way it keeps money flowing through the financial system.

Business

The central bank said on Thursday it would create two new facilities for banks to access funds depending on what it is needed for and that should remove the stigma that has come to be attached to using its present emergency lending facility.

Firstly, there will be a new overnight operational standing facility from October 20 where banks short of funds for technical reasons, such as a payments glitch, can borrow funds 25 basis points above the Bank's main lending rate, down from 100 basis points before.

The Bank will also create a 30-day discount window facility for banks with a more fundamental need for funds. The charge for this would start at 50 basis points and rise depending on quality of the collateral declined and usage of the facility.

"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," Bank Governor Mervyn King told reporters.

The Bank only reformed its money market operations two years but the credit crisis that started last year has forced central banks around the world to innovate how they provide funds to cash-starved banks who are afraid to lend to each other.

The Bank created a temporary Special Liquidity Scheme in April that allows banks to exchange their illiquid assets for safe government debt.

It was due to expire this month but has been extended to the end of January and will run in tandem to the new discount window facility, though the SLS provides funds for up to three years and is limited to accepting legacy assets.

WITCH HUNT

To avoid a witch hunt over which banks are using the facilities, the Bank will only publishes an average use of the standing facility once a month rather than the daily basis it does not.

Average use of the discount window will be published once a quarter.

(Reporting by Sumeet Desai and Matt Falloon

Edited by oldsport

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The DWF doesn't seem to have been drawn from at all (data to end '09).

The OSF was last used in May 09 (data to early May '10).

yeah, I saw that

but for the 364 day ones I think they don't need to report it until 5 quarters after the drawing has taken place

Table D2.2.3 shows the average aggregate daily value of gilts (or cash) lent with an initial maturity of 30 days or less (published one quarter in arrears) and the average aggregate daily value of gilts (or cash) lent with an initial maturity of more than 30 days (published five quarters in arrears).

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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