Bank is ready for year 2000 liquidity injection

THE BANK of England is considering flooding the financial markets with liquidity over the millennium weekend, amid fears a drying up of credit could spark wild swings in interest rates.

In its regular bulletin on year 2000 preparations, out today, the Bank acknowledges there is a real risk of market disruption in the run-up to the millennium.

Bank officials are determined to ensure there are no major hitches, and are discussing detailed contingency plans with the major financial institutions.

"We recognise there is a specific issue and we recognise the concerns of market participants," said John Trundle, head of the Bank's market infrastructure division.

The Bank's main worry is that uncertainties over year 2000 readiness will deter markets from lending to otherwise credit-worthy institutions. Collectively, this drying up of credit could result in low levels of market liquidity, which, in turn, could prompt excessively volatile movements in interest rates.

"It is part of our role to ensure liquidity shortages do not lead to market disruption," the Bank said.

The Bank is considering a two-pronged strategy to counter these problems. First, it is encouraging market participants to swap information in an attempt to eliminate uncertainty about year 2000 readiness. Second, it will be on stand-by over the millennium weekend to inject liquidity into the markets if problems do occur.

From a technical perspective, the Bank is confident the UK financial sector is on track for year 2000 compliance, despite the Financial Services Authority's recent finding that 12 of the largest financial institutions were behind schedule.

Mr Trundle said: "Their assessment [the FSA's] and ours are essentially the same. With so many institutions, it would be surprising if there were not one or two behind the game."

The Bank believes the millennium poses little risk to the UK's economic health, an assessment that has been challenged by several UK experts.

In a report out today, the Centre for Economics and Business Research warns that running down of stocks and scaling back of IT investment could wipe as much as 0.8 percentage points from growth in 2000.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory