Bank of England backs better liquidity support

Commercial banks will have full-time access to liquidity support in five different foreign currencies, the Bank of England announced yesterday.

Threadneedle Street said its existing temporary swap arrangements with its counterparts in the US, Japan, Europe, Canada and Switzerland will be made permanent, ensuring lenders will have ready access to a wide range of foreign currencies in times of market stress.

The move follows the Bank's announcement last week that its sterling liquidity backstop for banks will be made more generous and comprehensive. It is likely to be interpreted as part of the promise by the Governor, Mark Carney, to ensure the Bank is "open for business".

Mr Carney's predecessor, Lord King, was criticised in the 2007-09 financial crisis for being slow to provide liquidity support for struggling banks and for issuing warnings about the "moral hazard" of supporting commercial institutions that had made bad loans.

The Bank said the new arrangements would provide a "prudent" liquidity backstop for lenders.