Bank Of England Should Buy Up Toxic Loans
In recent months the governments has announced plans to introduce quantitative easing in a bid to drag the country out of recession and restore some growth to the UK economy and so far this seems to be having a positive effect, as banks and building societies have been able to exchange their “toxic” debts, on bad credit loans with long term arrears and defaults, for government backed securities, thereby easing their own liquidity problems and being able to consider offering new loans to consumers once again.
In a recent visit to the UK last month, the International Monetary Fund (IMF) met with the Bank of England and is thought to have been encouraging the Bank to increase the amount of quantitative easing over the coming months.
Buying up more asset backed securities on lenders’ toxic loans and homeowner loans. The Bank of England is authorised to carry out this action by the Treasury, but has not done so as yet, choosing instead to allow the government to provide the necessary funding directly. This of course, would commit more public money to buying bad credit loans from banks and freeing them up from the irresponsible lending decisions which have been made in the past, but would hopefully encourage interbank lending and in turn more funding availability for customers looking for a new loan.
Although the Bank of England has not yet made any decisions, it is thought that the IMF has put considerable pressure on it to carry out this action and with the Bank’s Monetary Policy Committee (MPC) regular monthly meeting to be held on Thursday (4th June) this week, it seems likely that the subject of quantitative easing will be fairly high up on the agenda.
