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Banks swap £16bn of securities in liquidity scheme

Banks may have swapped about £16bn of securities under the Bank of England’s Special Liquidity Scheme between its announcement on 21 April and the end of last month, according to New Star.

Chief economist Simon Ward says: “The figure is suggested by today’s broad money supply release for April, showing that banks removed £16.4 billion of loans from their balance sheets over the month – a record high and up from an average of just £500 million in the first three months of 2008.

“The most likely explanation is that banks were packaging up loans into securities to present to the Bank of England in return for Treasury bills. Take-up of £16 billion in the first 10 days of operation of the scheme would be impressive, supporting expectations that it could grow to well over £50 billion.”

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The mortgage market is certainly tough at the moment and in uncertain times the temptation is always to tighten up the marketing budget. That is fine and prudent but some would say this is exactly the time to crank up your marketing efforts.

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